Keysight technologies reports third quarter 2021 results
Santa rosa, calif.--(business wire)--keysight technologies, inc. (nyse: keys) today reported financial results for the third fiscal quarter of 2021 ended july 31, 2021. “keysight’s first-to-market, software-centric solutions strategy continues to yield consistently strong results. the durability of our business model was again on full display this quarter. we generated order and revenue growth of 23 percent and delivered 46 percent gaap and 29 percent non-gaap earnings per share growth, while effectively navigating supply chain challenges,” said ron nersesian, keysight’s chairman, president and ceo. “we have a track record of strong execution and delivering on our commitments, and we are confident in our ability to capitalize on the many growth opportunities ahead of us.” third quarter financial summary orders grew 23 percent to reach $1.31 billion, compared with $1.07 billion last year. revenue grew 23 percent to reach $1.25 billion, compared with $1.01 billion last year, or 21 percent on a core basis, which excludes the impact of foreign currency changes and revenue associated with businesses acquired or divested within the last twelve months. gaap net income was $254 million, or $1.36 per share, compared with $176 million, or $0.93 per share, in the third quarter of 2020. non-gaap net income was $286 million, or $1.54 per share, compared with $226 million, or $1.19 per share in the third quarter of 2020. cash flow from operations was $257 million, compared with $183 million last year. free cash flow was $217 million, compared with $151 million in the third quarter of 2020. as of july 31, 2021, cash and cash equivalents totaled $2.15 billion. reporting segments communications solutions group (csg) csg reported revenue of $875 million in the third quarter, up 15 percent over last year, driven by continued investment in global 5g deployments, the roll-out of new 5g chipsets and devices, 400g and 800g ethernet for data centers, as well as early 6g research, space, electromagnetic spectrum operations, and satellite applications. electronic industrial solutions group (eisg) eisg reported revenue of $371 million in the third quarter, up 48 percent over last year, driven by ongoing macroeconomic recovery across all regions, and strong double-digit growth in semiconductor, general electronics, and automotive and energy solutions. outlook keysight’s fourth fiscal quarter of 2021 revenue is expected to be in the range of $1.25 billion to $1.27 billion. non-gaap earnings per share for the fourth fiscal quarter of 2021 are expected to be in the range of $1.59 to $1.65, which exclude items that pertain to future events and are not currently estimable with a reasonable degree of accuracy. therefore, no reconciliation to gaap amounts has been provided. further information is discussed in the section titled “use of non-gaap financial measures” below. webcast keysight’s management will present more details about its third quarter fy2021 financial results and its fourth quarter fy2021 outlook on a conference call with investors today at 1:30 p.m. pt. this event will be webcast in listen-only mode. listeners may log on to the call at www.investor.keysight.com under the “upcoming events” section and select “q3 2021 keysight technologies inc. earnings conference call” to participate or dial +1 833-968-2178 (u.s. only) or +1 778-560-2837 (international) and enter passcode 6459032. the webcast will remain on the company site for 90 days. forward-looking statements this communication contains forward-looking statements as defined in the securities exchange act of 1934 and is subject to the safe harbors created therein. the words “expect,” “intend,” “will,” “should,” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. these forward-looking statements involve risks and uncertainties that could significantly affect the expected results and are based on certain key assumptions of keysight’s management and on currently available information. due to such uncertainties and risks, no assurances can be given that such expectations or assumptions 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, predictions, future guidance, projections, beliefs, and expectations about the company’s goals, revenues, financial condition, earnings, impacts of us export control regulations, and operations 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 impacts to the supply chain; government mandates related to pandemic conditions such as covid-19 and its variants; changes in the demand for current and new products, technologies, and services; customer purchasing decisions and timing; and order cancellations. in addition to the risks above, other risks that keysight faces include those detailed in keysight’s filings with the securities and exchange commission on keysight’s annual report on form 10-k for the fiscal year ended october 31, 2020 and keysight’s quarterly report on form 10-q for the period ended april 30, 2021. segment data segment data reflects the results of our reportable segments under our management reporting system. segment data are provided on page 6 of the attached tables. use of non-gaap financial measures in addition to financial information prepared in accordance with u.s. gaap (“gaap”), this document also contains certain non-gaap financial measures based on management’s view of performance, including: core revenue non-gaap net income/earnings non-gaap net income per share/earnings per share free cash flow income per share is based on weighted average diluted share count. see the attached supplemental schedules for reconciliations of each non-gaap financial measure to its most directly comparable gaap financial measure for the three months ended july 31, 2021. following the reconciliations is a discussion of the items adjusted from our non-gaap financial measures and the company’s reasons for including or excluding certain categories of income or expenses from our non-gaap results. about keysight technologies keysight delivers advanced design and validation solutions that help accelerate innovation to connect and secure the world. keysight’s dedication to speed and precision extends to software-driven insights and analytics that bring tomorrow’s technology products to market faster across the development lifecycle, in design simulation, prototype validation, automated software testing, manufacturing analysis, and network performance optimization and visibility in enterprise, service provider and cloud environments. our customers span the worldwide communications and industrial ecosystems, aerospace and defense, automotive, energy, semiconductor and general electronics markets. keysight generated revenues of $4.2b in fiscal year 2020. for more information about keysight technologies (nyse: keys), visit us at www.keysight.com. additional information about keysight technologies is available in the newsroom at www.keysight.com/go/news and on facebook, linkedin, twitter and youtube. source: ir-keys three months ended july 31, percent 2021 2020 inc/(dec) $ 1,310 $ 1,067 23 % $ 1,246 $ 1,011 23 % 458 405 13 % 207 169 23 % 302 259 17 % (5) (4) 11 % 962 829 16 % 284 182 55 % 1 1 (44)% (20) (20) 2 % 5 22 (73)% 270 185 46 % 16 9 84 % $ 254 $ 176 44 % $ 1.38 $ 0.94 $ 1.36 $ 0.93 184 187 186 190 nine months ended july 31, percent 2021 2020 inc/(dec) $ 3,865 $ 3,297 17 % $ 3,647 $ 3,001 22 % 1,415 1,224 16 % 615 522 18 % 900 810 11 % (14) (42) (66)% 2,916 2,514 16 % 731 487 50 % 2 11 (85)% (59) (59) 1 % (1) 56 – 673 495 36 % 61 85 (29)% $ 612 $ 410 49 % $ 3.31 $ 2.19 $ 3.27 $ 2.16 185 187 187 190 july 31, october 31, 2021 2020 $ 2,153 $ 1,756 677 606 770 757 229 255 3,829 3,374 616 595 231 182 1,610 1,537 283 361 68 61 739 740 428 368 $ 7,804 $ 7,218 $ 249 $ 224 294 289 476 391 47 64 41 43 92 70 1,199 1,081 1,791 1,789 348 362 179 175 196 149 341 365 4,054 3,921 - - 2 2 (1,072) (752) 2,200 2,110 3,148 2,536 (528) (599) 3,750 3,297 $ 7,804 $ 7,218 2021 2020 $ 612 $ 410 87 76 149 163 83 72 (49) 7 20 21 16 - - (32) 7 (10) (64) 112 (30) (91) 10 (60) (12) (57) 86 35 8 8 5 (9) 26 33 954 678 (101) (87) (136) (324) - 32 (1) - (238) (379) 59 57 (53) (52) (320) (196) (2) - - (7) (1) - (317) (198) 4 2 403 103 1,767 1,600 $ 2,170 $ 1,703 $ 37 $ 38 $ 100 $ 66 year-over-year compare q3'21 q3'20 percent inc/(dec) $ 1,246 $ 1,011 23% (11) - (13) - $ 1,222 $ 1,011 21% $ 875 $ 760 15 % 65.7 % 65.2 % $ 224 $ 197 26 % 26 % $ 371 $ 251 48 % 63.7 % 62.4 % $ 115 $ 67 31 % 27 % three months ended nine months ended july 31, july 31, 2021 2020 2021 2020 net income diluted eps net income diluted eps net income diluted eps net income diluted eps $ 254 $ 1.36 $ 176 $ 0.93 $ 612 $ 3.27 $ 410 $ 2.16 33 0.18 54 0.28 147 0.79 167 0.87 19 0.10 19 0.09 84 0.45 73 0.38 2 0.01 7 0.04 8 0.04 11 0.06 - - - - - - (32) (0.17) 2 0.01 (8) (0.03) 27 0.15 (16) (0.08) (24) (0.12) (22) (0.12) (52) (0.28) 1 0.01 $ 286 $ 1.54 $ 226 $ 1.19 $ 826 $ 4.42 $ 614 $ 3.23 186 190 187 190 $ 257 $ 183 (40) (32) $ 217 $ 151 acquisition-related items: we exclude the impact of certain items recorded in connection with business combinations from our non-gaap financial measures that are either non-cash or not normal, recurring operating expenses due to their nature, variability of amounts and lack of predictability as to occurrence or timing. these amounts may include non-cash items such as the amortization of acquired intangible assets and amortization of items associated with fair value purchase accounting adjustments, including recognition of acquired deferred revenue (see non-gaap revenue above). we also exclude other acquisition and integration costs associated with business acquisitions that are not normal recurring operating expenses, including amortization of amounts paid to redeem acquires’ unvested stock-based compensation awards, and legal, accounting and due diligence costs. we exclude these charges to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance. share-based compensation expense: we exclude share-based compensation expense from our non-gaap financial measures because share-based compensation expense can vary significantly from period to period based on the company’s share price, as well as the timing, size and nature of equity awards granted. management believes the exclusion of this expense facilitates the ability of investors to compare the company’s operating results with those of other companies, many of which also exclude share-based compensation expense in determining their non-gaap financial measures. gain on insurance settlement: we exclude certain other significant income or expense items that may occur occasionally and are not normal and recurring from our non-gaap financial measures. this represents cost and recoveries related to the 2017 northern california wildfires. restructuring and others: we exclude incremental expenses associated with restructuring initiatives, usually aimed at material changes in the business or cost structure. such costs may include employee separation costs, asset impairments, facility-related costs, contract termination fees, and costs to move operations from one location to another. these activities can vary significantly from period to period based on the timing, size and nature of restructuring plans; therefore, we do not consider such costs to be normal, recurring operating expenses. we also exclude “others”, not normal, recurring, cash operating income/expenses from our non-gaap financial measures. such items are evaluated on an individual basis, based on both quantitative and qualitative factors and generally represent items that we do not anticipate occurring as part of our normal business. while not all-inclusive, examples of such items would include net unrealized gains on equity investments still held, significant non-recurring events like realized gains or losses associated with our employee benefit plans, costs and recoveries related to unusual events, gain on sale of assets/divestitures, etc. we believe that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to our operating performance in other periods. estimated tax rate: we utilize a consistent methodology for long-term projected non-gaap tax rate. when projecting this long-term rate, we exclude any tax benefits or expenses that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. additionally, we evaluate our current long-term projections, current tax structure and other factors, such as existing tax positions in various jurisdictions and key tax holidays in major jurisdictions where keysight operates. this tax rate could change in the future for a variety of reasons, including but not limited to significant changes in geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where keysight operates. the above reasons also limit our ability to reasonably estimate the future gaap tax rate and provide a reconciliation of the expected non-gaap earnings per share for the fourth fiscal quarter of 2021 to the gaap equivalent. page 9
