Keysight Q2 2020 Revenue Declines Due to COVID-19

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Keysight Q2 2020 Revenue Declines Due to COVID-19

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Keysight Technologies (NYSE: KEYS) has reported the result for the second quarter of 2020 on 26th May 2020. The period of this quarter ended on 30th April 2020. The disruption caused by COVID-19 has affected the revenues of the company. Revenue in Q2 2020 has declined by 18% over a year.

Financial Highlights of Q2 2020 Results:

  1. Revenue: In this quarter, revenue earned by the company was $895 million, down by 18% from $1,090 million earned in the same period year ago.
  2. Total Cost and expenses: Total cost and expenses occurred by the company in Q2 2020 was $793 million, declined by 12% from $905 million spend in Q2 2019.
  3. Selling, General, and Administrative expenses: Amount spent by the company as selling, general and administrative expenses in Q2 2020 was $251 million, down by 12% $300 million spent in the same quarter of 2019.
  4. Research and Development Expense: Keysight has spent $166 million in Q2 2020 for research and development, down by 2% from 171 million spend in Q2 2019.
  5. Operating Income: Operating income reported by the company in Q2 of this year was $102 million, declined by 45% from $185 million earned in Q2 of 2019.
  6. EBIT: Keysight’s EBIT in Q2 2020 was $128 million, down by 40% from $213 million in Q2 2019.
  7. Cash and cash equivalents: Cash and cash Equivalents at the of Q2 2020 was $1,841 million compared to $1,598 million at the end of Q2 2019.
  8. Net Profit: Net Profit earned by Keysight in the second quarter of 2020 was $71 million, down by 54% from $153 million earned in the same period of the previous year.
  9. Diluted EPS: Diluted EPS for Q2 2020 was $0.37 compared to $0.80 in Q2 2019.
  10. Total Orders: Keysight Order in Q2 2020 was $1,089 million, down by 3% from $1,121 million in Q2 2019.

COVID-19 Impact and actions

On 18th March 2020, the company in its press release had stated that it will not be able to meet its guidance mention in the Q1 2020 report in the second quarter of 2020 due to lockdown imposed by government and distribution in supply Chain due to COVID-19. Demand in the market was steady in February, as COVID-19 started spreading from China to all around the world, revenue of the company started declining. On 18th March 2020, the company closed most of the locations including production and fulfillment order facilities around the globe. The operation was closed for two weeks in March and limited activity was done in April.

During COVID-19, Keysight is donating personal protective equipment to hospitals and government agencies. Company is all working with government and health officials to implement all the safety measures before the start of production. Company is planning to open all the locations around the globe soon. Keysight on 31st March 2020, announced the launch of Innovate Anywhere Program to enable IT, teams, to support remote users ensuring VPN performance and security.

Segment Information

Keysight operates business in two different segments. Both the segments have witnessed a decline in revenue in this Quarter.

  1. Communication Solution: Revenue generated in this segment was $653 million in Q2 2020, down by 18% from $794 million generated in Q2 2019. This segment has contributed approximately 72% of the total revenue. The company claims that this segment has seen a decline due to supply chain disruption related to COVID-19.In the crisis, the company has received strong demand in 5G, aerospace defense and government solution. On 12th March 2020, the company announced the collaboration with Nokia to provide solutions in the test process in Nokia 5G base station.  28th April 2020, the company launched loadcore, which will allow the mobile operators to test voice, data, and other services on the 5G network. Collaborating globally with different companies for 5G testing solution, has provided an opportunity in this crisis to increase the revenue.

 

  1. Electronic Industrial Solutions: This segment was able to generate revenue of $242 million in Q2 2020, decline by 19% from $299 million generated in the same period year ago. This segment has contributed approximately 28% of the total revenue. Disruption in supply chain and stop in the production has affected the revenue.The contribution of revenue in this segment was due to an increase in investment made by Foundry customers in advanced process node technologies and incremental infrastructure. Demand in automotive, education, and electronics have declined. On 30th March 2020, the company launched the UXR Oscilloscopes which can be used for the analysis of bandwidth measurement. On 16th April 2020, Keysight and DEKRA decided to work together for electric vehicle development, DEKRA will use Keysight’s Scienlab Charging Discovery System (CDS) solutions to test and certify the charging technology within an electric vehicle (EV).

 

Final Take

Keysight in its guidance has not mentioned the amount of revenue will be able to earn in the next quarter. The company expects that supply chain disruption will be eliminated by the end of the third quarter. Providing 5G installation and testing solutions to its customer will increase the revenue of the company but since demand in most of the sector has declined due to crisis, it is expected that the revenue of the company may decline in the next quarter with respect to the same period a year ago.

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