Keysight Technologies Inc. EBITDA surged on 11.9% and EBITDA Margin increased on 3.3 pp from 23.7% to 27.0%
11/18/2020 • About Keysight Technologies Inc. (
$KEYS) • By InTwits
Keysight Technologies Inc. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 27.0% in FY2020, 23.7% in FY2019, -0.9% in FY2018, 14.6% in FY2017, 18.5% in FY2016
- Keysight Technologies Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $294m in FY2020, $217m in FY2019, $163m in FY2018, $113m in FY2017, $77m in FY2016
- In the last 5 years the company invested considerably less than D&A: $532m vs. $669m
- The company has highly profitable business model: ROIC is 15.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.2x while industry average is -0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased slightly on 1.9%. Annual revenue decline showed slowdown in FY20Q4 - revenue increased on 8.9%. During the last 5 years Revenue growth topped in FY2018 at 21.6% and was decelerating since that time. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 3.3 pp from 23.7% to 27.0% in FY2020. During the last 5 years EBITDA Margin bottomed in FY2018 at -0.93% and was growing since that time.
Gross Margin increased slightly on 1.1 pp from 58.9% to 60.0% in FY2020. During FY2016-FY2020 Gross Margin bottomed in FY2017 at 53.4% and was growing since that time. SG&A as a % of Revenue decreased slightly on 0.85 pp from 26.8% to 26.0% in FY2020. During the last 5 years SG&A as a % of Revenue topped in FY2017 at 32.9% and was declining since that time.
Net Income margin showed almost no change in FY2020. During FY2016-FY2020 Net Income margin bottomed in FY2017 at 3.2% and was growing since that time.
Investments (CAPEX, working capital and M&A)
In FY2020 the company had CAPEX/Revenue of 2.8%. CAPEX/Revenue increased slightly on 0.51 pp from 2.3% in FY2017 to 2.8% in FY2020. It's average level of CAPEX/Revenue for the last three years was 3.0%.
Return on investment
The company operates at good ROIC (15.1%) and ROE (19.9%). ROIC showed almost no change in FY2020. ROE decreased on 2.9 pp from 22.8% to 19.9% in FY2020.
Leverage (Debt)
Debt level is 0.2x Net Debt / EBITDA and 1.7x Debt / EBITDA. Net Debt / EBITDA increased slightly on 0.011x from 0.2x to 0.2x in FY2020. Debt jumped on 10.8% while cash increased on 9.9%.
Keysight Technologies Inc. has no short term refinancing risk: cash is higher than short term debt (4,083.7%).
Valuation and dividends
The company's trades at EV/EBITDA 19.4x and P/E 35.0x.
Management team
Ronald S Nersesian "Ron" is a the company's CEO. Ronald S Nersesian "Ron" has spent 7 years with the company. Neil Dougherty is a the company's CFO. Neil Dougherty has spent 7 years at the company.
Financial and operational results
FY ended 10/31/2020
Keysight Technologies Inc. ($KEYS) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 2,918 | 3,189 | 3,878 | 4,303 | 4,221 | -1.9% |
| Gross Profit | 1,624 | 1,702 | 2,122 | 2,534 | 2,533 | -0.0% |
| SG&A | 818 | 1,049 | 1,185 | 1,155 | 1,097 | -5.0% |
| EBITDA | 540 | 464 | -36 | 1,019 | 1,140 | 11.9% |
| EBIT | 406 | 239 | -346 | | | |
| Interest expence | 47 | 80 | 83 | | | |
| Tax | 31 | 77 | -576 | | | |
| Net Income | 335 | 102 | 165 | 621 | 627 | 1.0% |
| Stock Based Compensation | 54 | 56 | 59 | | | |
Balance Sheet
|
|---|
| Cash | 783 | 818 | 913 | 1,598 | 1,756 | 9.9% |
| Accounts Receivable | 437 | 547 | 624 | | | |
| Inventory | 474 | 588 | 619 | | | |
| Accounts Payable | 189 | 211 | 242 | | | |
| Short Term Debt | 0 | 10 | 499 | 0 | 43 | |
| Long Term Debt | 1,093 | 2,038 | 1,291 | 1,788 | 1,938 | 8.4% |
Cash flow
|
|---|
| Capex | 91 | 72 | 132 | 120 | 117 | -2.5% |
| Acquisitions | 10 | 1,702 | 11 | | | |
Ratios
|
|---|
| Revenue growth | 2.2% | 9.3% | 21.6% | 11.0% | -1.9% | |
| EBITDA growth | 1.9% | -14.1% | -107.8% | -2,930.6% | 11.9% | |
|
|---|
| Gross Margin | 55.7% | 53.4% | 54.7% | 58.9% | 60.0% | 1.1% |
| EBITDA Margin | 18.5% | 14.6% | -0.9% | 23.7% | 27.0% | 3.3% |
| EBIT Margin | 13.9% | 7.5% | -8.9% | | |
| SG&A, % of revenue | 28.0% | 32.9% | 30.6% | 26.8% | 26.0% | -0.9% |
| SBC, % of revenue | 1.9% | 1.8% | 1.5% | | |
| Net Income Margin | 11.5% | 3.2% | 4.3% | 14.4% | 14.9% | 0.4% |
| CAPEX, % of revenue | 3.1% | 2.3% | 3.4% | 2.8% | 2.8% | -0.0% |
|
|---|
| ROIC | 16.9% | 6.8% | -8.0% | 15.6% | 15.1% | -0.5% |
| ROE | 23.8% | 5.3% | 7.0% | 22.8% | 19.9% | -2.9% |
| Net Debt/EBITDA | 0.6x | 2.7x | | 0.2x | 0.2x | 0.0x |
| Interest coverage ratio (ICR) | 8.6x | 3.0x | | | |
| Interest expence / Average debt | 4.3% | 5.1% | 4.3% | | | |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | | | |
| Employees | 10,300 | 12,600 | 12,900 | | | |
| Revenue/Employee, th. $ | 283 | 253 | 301 | | | |
Keysight Technologies Inc. ($KEYS) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,095 | 895 | 1,011 | 1,220 | | 8.8% | -17.9% | -7.0% | 8.9% |
| EBITDA | 294 | 193 | 275 | 378 | | 49.2% | -25.8% | 0.0% | 31.7% |
| Net Income | 163 | 71 | 176 | 217 | | 43.0% | -53.6% | 10.7% | 11.3% |
Balance Sheet
|
|---|
| Cash | 1,691 | 1,841 | 1,697 | 1,756 | | 54.0% | 44.2% | 21.7% | 9.9% |
| Short Term Debt | 36 | 38 | 43 | 43 | | -92.8% | -92.4% | -91.4% | - |
| Long Term Debt | 1,916 | 1,912 | 1,944 | 1,938 | | 48.4% | 48.0% | 50.5% | 8.4% |
Ratios
|
|---|
| Gross Margin | 59.8% | 57.7% | 59.9% | 62.0% | | 2.4% | -1.8% | 0.8% | 2.6% |
| EBITDA Margin | 26.8% | 21.6% | 27.2% | 31.0% | | 7.3% | -2.3% | 1.9% | 5.4% |
| Net Income Margin | 14.9% | 7.9% | 17.4% | 17.8% | | 3.6% | -6.1% | 2.8% | 0.4% |
Peers in Electronic Equipment & Instruments
Below we provide Keysight Technologies Inc. benchmarking against other companies in Electronic Equipment & Instruments industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Intellicheck, Inc. ($IDN) | - | -6.3% | 23.2% | 72.9% | 40.1% |
| nLIGHT, Inc. ($LASR) | - | 36.8% | 38.1% | -7.7% | 26.1% |
| Luna Innovations Incorporated ($LUNA) | - | -21.0% | 29.7% | 64.3% | 17.3% |
| PAR Technology Corporation ($PAR) | - | 1.3% | -13.5% | -7.0% | 14.2% |
| Cognex Corporation ($CGNX) | - | 44.7% | 5.3% | -10.0% | 11.8% |
| |
|---|
| Median (26 companies) | -3.8% | 4.1% | 10.4% | 4.4% | -3.5% |
|---|
| Keysight Technologies Inc. ($KEYS) | - | 9.3% | 21.6% | 11.0% | -1.9% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Intellicheck, Inc. ($IDN) | 80.0% | 85.5% | 91.3% | 87.0% | 86.7% |
| Cognex Corporation ($CGNX) | 75.2% | 75.6% | 74.4% | 73.8% | 74.5% |
| National Instruments Corporation ($NATI) | 74.5% | 74.5% | 75.4% | 75.1% | 71.2% |
| Coda Octopus Group, Inc. ($CODA) | - | 66.4% | - | 65.6% | 63.5% |
| Applied DNA Sciences Inc ($APDN) | 82.2% | 77.3% | 69.1% | 83.7% | 62.7% |
| |
|---|
| Median (26 companies) | 39.4% | 41.0% | 40.4% | 42.2% | 42.9% |
|---|
| Keysight Technologies Inc. ($KEYS) | 55.7% | 53.4% | 54.7% | 58.9% | 60.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cognex Corporation ($CGNX) | 31.9% | 36.0% | 30.1% | 24.0% | 25.3% |
| National Instruments Corporation ($NATI) | 15.7% | 16.9% | 17.9% | 20.0% | 22.3% |
| FLIR Systems, Inc. ($FLIR) | 21.3% | 20.0% | 21.7% | 20.6% | 22.0% |
| Badger Meter, Inc. ($BMI) | 18.6% | 20.1% | 18.7% | 21.1% | 21.2% |
| Track Group Inc ($TRCK) | -3.5% | -1.4% | 7.6% | 15.4% | 21.0% |
| |
|---|
| Median (26 companies) | 2.9% | 4.1% | 4.2% | 12.0% | 8.7% |
|---|
| Keysight Technologies Inc. ($KEYS) | 18.5% | 14.6% | -0.9% | 23.7% | 27.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Know Labs Inc ($KNWN) | 0.4% | 0.0% | 2.3% | 4.4% | 57.5% |
| Applied DNA Sciences Inc ($APDN) | 16.1% | 3.1% | 6.8% | 1.3% | 55.1% |
| nLIGHT, Inc. ($LASR) | 4.0% | 4.0% | 6.1% | 7.7% | 10.9% |
| Vishay Precision Group, Inc. ($VPG) | 4.6% | 2.7% | 4.8% | 3.9% | 8.5% |
| LightPath Technologies, Inc. ($LPTH) | 6.5% | 7.8% | 7.7% | 5.7% | 7.0% |
| |
|---|
| Median (25 companies) | 2.0% | 1.6% | 2.2% | 1.9% | 2.1% |
|---|
| Keysight Technologies Inc. ($KEYS) | 3.1% | 2.3% | 3.4% | 2.8% | 2.8% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zebra Technologies Corporation ($ZBRA) | 2.2% | 10.2% | 20.8% | 23.2% | 20.0% |
| Badger Meter, Inc. ($BMI) | 16.9% | 18.2% | 17.6% | 18.7% | 18.5% |
| National Instruments Corporation ($NATI) | 10.3% | 12.5% | 14.2% | 13.9% | 14.8% |
| Cognex Corporation ($CGNX) | 17.7% | 25.6% | 20.1% | 11.9% | 13.9% |
| NAPCO Security Technologies, Inc. ($NSSC) | - | - | - | 19.8% | 13.6% |
| |
|---|
| Median (26 companies) | 2.1% | 2.6% | 1.3% | 7.8% | 3.4% |
|---|
| Keysight Technologies Inc. ($KEYS) | 16.9% | 6.8% | -8.0% | 15.6% | 15.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Identiv, Inc. ($INVE) | - | - | 2.1x | 1.9x | 9.0x |
| Itron, Inc. ($ITRI) | 1.0x | 2.0x | 12.3x | 3.2x | 7.3x |
| Track Group Inc ($TRCK) | - | - | 12.2x | 5.2x | 3.5x |
| Trimble Inc. ($TRMB) | 1.1x | 1.3x | 3.4x | 2.9x | 2.2x |
| Luna Innovations Incorporated ($LUNA) | -6.9x | -108.1x | -19.9x | -2.9x | 1.8x |
| |
|---|
| Median (16 companies) | -0.9x | -0.9x | -0.9x | 0.5x | 0.7x |
|---|
| Keysight Technologies Inc. ($KEYS) | 0.6x | 2.7x | - | 0.2x | 0.2x |
