EMG Wireless Communications Strategy Update · -profit throughout the business cycle and delivered...

Keysight Technologies Institutional Investor Meetings

June 2015

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This presentation contains forward-looking statements (including, without limitation, 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 company’s ability to pay dividends, ability to access capital markets, 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 results of Keysight to differ materially from management’s current expectations. 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, other risks that the company faces in running our operations include the ability to realize fully the benefits of our separation from Agilent Technologies Inc., the ability to execute successfully through business cycles; the ability to adapt successfully our cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross margin pressures; the risk that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties on our markets and our ability to conduct business; the ability to improve asset performance to adapt to changes in demand; the ability to introduce successfully new products at the right time, price and mix; and other risks detailed in the company’s filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 4, 2015.

You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. The company assumes no obligation to update the information in this presentation in light of new information or future events. This presentation and the Q&A that follows include forward-looking, non-GAAP measures. Non-GAAP measures generally exclude the impacts of acquisition and integration costs, future restructuring costs, asset impairment charges, separation costs, stock based compensation, and non-cash intangibles amortization. Also excluded are tax benefits or expenses which are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Accordingly, no reconciliation to GAAP amounts has been provided.

2

Safe Harbor

3 Page

Introduction to Keysight Technologies

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NET REVENUE IN FY14 $2.9 billion ( ~64% from outside the US)

EMPLOYEES ~9,600

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 LISTING NYSE: KEYS

Shares Outstanding

(at distribution) 167.5 million

4

Keysight at a Glance

%

45%

36%

Keysight Overview Unlocking measurement insights for 75 years

FY14 Revenue by Geography Headcount

Americas

Europe

Asia Pacific

13%

52%

35%

Europe

Asia Pacific

Americas

• Global electronic measurement technology

and market leader

• Strong financial profile

• Deep and loyal customer base

• ~75% of revenue via direct channel

• 12 R&D centers across the world

(1) Non-GAAP measure. Excludes stock-based compensation. See reconciliation to GAAP

financial measures in Appendix.

(2) Non-GAAP measure. Calculation included in Appendix.

• FY14 Revenues $2.9B

• FY 14 Operating Margin(1) 20.5%

• FY14 ROIC(2) 35%

• Headcount ~9,600

Financial Metrics

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Q1’15 Q2’15 Q3’15 Guidance

(1)

Revenue $701M $740M $655M

Core Revenue Growth(2) +7% +3% -10%

Gross Margin(3) 55.6% 57.1% -

Operating Margin(3) 17.1% 20.3% -

EPS(3) $0.56 $0.70 $0.44

Operating Cash Flow $92M $68M -

6

Q2 Highlights & Q3 Guidance

• EPS at high end of guidance range

• Currency headwinds on revenue had no material impact on operating profit

• Strong earnings driven by favorable revenue mix and lower expenses

• Soft orders and reduced backlog tempers Q3 outlook and guidance

• Actions initiated for $25M in structural savings to mitigate separation dis-synergies

(1) Midpoint of guidance as of May 19, 2015

(2) Core growth is reported growth adjusted for the effects of M&A and FX

(3) Presented on a non-GAAP basis; reconciliations to closest GAAP equivalent provided for actual results

Financial Highlights Q2 FY15

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• Favorable trends in our end markets

• Communications – explosive mobile data growth

• Aerospace/Defense – defense modernization

• Industrial, Computers & Semiconductors – electronic content proliferation

• Transforming our portfolio in segments with highest growth opportunities

• Wireless Communications - Evolving wireless standards drive investment in

emerging networking standards and technologies

• Modular Solutions - Ability to leverage industry-leading feature-rich instrument

capabilities into modular solutions

• Software Solutions - Value migration to software solutions that link the simulated

world to the real instrumentation world

• Growth and sustainable cash flows to create long-term value for shareholders

7

Keysight Technologies Value Creation

8 Page

Investment Highlights

Focused Team with Deep Electronic Measurement Roots

Attractive End Markets

Market Leadership

Deep Customer Relationships

Portfolio Transformation for Growth

Strong Operating Model

1

2

3

4

5

6

Investment Highlights

Mike Gasparian Customer Support, Services, & Marketing SVP

Previously Agilent VP of Marketing for EMG

34 years

Neil Dougherty CFO

Previously Agilent VP and Treasurer

Ron Nersesian President & CEO

Previously Agilent President and COO

Guy Séné Measurement Solutions & Worldwide Sales SVP

Previously Agilent President of EM

Test &

Measurement

Experience

30

years

37

years

Gooi Soon Chai Order Fulfillment & Infrastructure

Previously Agilent President OF and Supply Chain

29 years

Jay Alexander Chief Technology Officer

Previously VP of Agilent’s Oscilloscope and

Protocol Division within EMG

28 years

18 years

Ran divisions and business units in Agilent, as well as

worldwide sales and service organizations.

Led global treasury organization, including corporate finance,

cash management, foreign currency exchange and risk

management.

Transformed Agilent’s Electronic Measurement Group to deliver

double digit-profit throughout the business cycle and delivered

the highest EM operating margin in Agilent history.

Led Agilent’s largest business group and has 26 years

experience in sales and marketing in Europe and Asia.

Consolidated and streamlined electronic measurement

infrastructure; managed diverse portfolio of EM business lines.

Responsible for key growth and profit increases in Agilent with

deep R&D background and business experience.

1 Focused Team with Deep Electronic Measurement Roots Executive staff with 29 years average industry experience

Attractive End Markets Evolving market segments present opportunities

(1) Per Company estimates

(2) Percentage of FY14 Keysight revenue

(3) Excludes network assurance

Market Size(1): $12B

Communications (3) Aerospace Defense Industrial, Computers,

Semiconductors

Revenue Mix (2) 34% 22% 44%

Market Size (1) $4B $3B $5B

3-Year Market Growth(1) 4-6% Flat 3-5%

Growth Drivers

Explosive Mobile

Data Growth

• Mobile devices drive data

growth and new standards

(LTE-A, 5G)

• Wireless everywhere

• Increasing complexity of

chipsets

• Cloud applications

• “Internet of Things”

Defense

Modernization

• Growth outside U.S. and

western Europe

• Growth in radar and

satellite

• Strength in intelligence,

surveillance, and

reconnaissance (ISR)

Electronic Content

Proliferation

• Increasing electronic content

• Demand for business and

consumer Cloud computing

• Research and education

demand

• Alternative energy and power

management

• High-density memory

Transformation

Opportunities

Wireless R&D and

Manufacturing Solutions

Modular Solutions

Software

Long Term Market Growth(1): 3-4%

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Core Platforms Leadership Position

Electronic

Design

Automation

Software

Highest performance design software used by 2/3 of the

world’s RF/Microwave designers

Network

Analyzers Highest performance, broadest offering, including industry-

leading PNA-X microwave network analyzers

Signal

Analyzers Highest performance signal analyzer family, including the

flagship PXA X-Series

Signal

Sources Highest performance signal generators led by the industry-

standard PSG performance signal generator

Oscilloscopes Product leadership in high-performance oscilloscopes with

proprietary technology and application expertise

One Box

Testers Two new R&D (UXM) and manufacturing (EXM) platforms for

4G and beyond

Market Leadership Technology core fuels portfolio transformation

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Deep Customer Relationships Most Fortune 1000 electronics companies are Keysight customers

4

13

• Diverse customer base with no single customer

accounting for more than 10% of revenues(1)

• 75% of customer revenue via direct sales channel

coverage, including all of Keysight’s top customers

• Indirect sales channel with over 600 indirect partners

worldwide

Key Customer Facts

Typical Keysight Customers

• Communications

• Base station and handset manufacturers, electronic

component suppliers, chipset suppliers

• Aerospace and defense

• Governments, prime contractors, component suppliers

• Industrial, Computers, and Semiconductors

• General electrical engineering, semiconductor foundries,

computer and tablet suppliers

19%

45%

36%

34%

22%

44%

Europe

Asia

Pacific

Americas

Industrial,

Computer

& Semi

Aerospace

Defense

Communications

FY14 Revenue by Geography

FY14 Revenue by End Market

(1) FY11-14 revenues

Keysight Customer Support and Service Founded on deep customer relationships and trust

4

• Independent test labs

• Original equipment manufacturers

Competitors

• Global Reach & Capability

• Service centers in 30 countries repair and

calibrate customer test equipment

• Consistent support for multi-national

customers at 50+ sites worldwide

• Broad Service Offering

• Designed and delivered by a global team

of experts

• Mobile on-site calibration services

• Trade-in and certified used product sales

• Deep Domain Expertise

• Experts in the science of electrical

and physical dimensional

measurements

• Affiliated with 35 calibration

standards bodies in 17 countries

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

manufacturing platforms to support 4G and beyond

Modular Solutions

• Ability to leverage industry-leading feature-rich instrument

capabilities into modular solutions

• Only company to provide top technology in customers’ form

factor of choice

Software Solutions

• Value migration to software solutions that link the simulated

world to the real instrumentation world

• Consistency of measurement science across instruments,

modules, and software

5

Strong Operating Model Superior and stable financial performance throughout cycle

(1) Source: Prime Data Market Research

6

(1) Non-GAAP measures. See reconciliation to GAAP financial measures in Appendix

Operating Margin 18.7%

Adj. EBITDA Margin 21.7%

Free Cash Flow: $129M (includes $28M in Agilent payments)

ROIC 34%

H1’15 Profitability & Capital

Efficiency Metrics(1)

• Specific levers and management process enable strong

financial performance throughout the cycle

• Minimal fixed cost growth

• Outsourced lower-level manufacturing and on-going

gross margin improvement through value engineering

• Indirect channel and flexible sales structure

• Flexible operating expenses and technology leverage

• Variable and incentive pay programs scale with

business results

• Disciplined expense and capital management ensures rapid response to macro

environment

• Initiated $25M in structural cost reductions in Q215 to offset separation-related dis-

synergies within 24 months

• Strong margin and ROIC performance generates sustainable cash flows across the cycle

Capital structure as of April 30, 2015

• Cash and equivalents of $894M

• Majority of cash is generated offshore with sufficient free cash flow accessible in the U.S.

• $1.1B debt (tranches of $500M and $600M maturing in 2019 and 2024 respectively)

• 1H Adjusted EBITDA(1) $312M

• Total Debt / Adjusted EBITDA(1,2) 1.6x

Sources of liquidity

• Unsecured revolving credit facility of $300M

Priority uses of cash

• Invest for growth

• Return of capital as and when appropriate

(1) Non GAAP Measure. See reconciliation to GAAP financial measures in Appendix

(2) The ratio is based on an adjusted Non GAAP EBITDA from Q2’14 to Q2’15.

Keysight Technologies Liquidity and Capital Structure Our Top Priority is Growth

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* Presented on a non-GAAP basis; reconciliations to closest GAAP equivalent provided.

Recent Quarterly Financial Results* (adjusted for stock-based compensation)

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Electronic Measurement Group of Agilent Keysight Technologies

$M (except per share amounts) Q1’14 Q2’14 Q3’14 Q4’14 Q1'15 Q2'15

Revenue 671 743 757 762 701 740

Cost of Goods Sold 294 323 337 335 311 318

Gross Margin 377 420 420 427 390 422

GM% 56.1% 56.6% 55.5% 56.1% 55.6% 57.1%

R&D 87 88 89 88 91 95

SG&A 172 175 173 171 179 177

Income from Operations 118 157 158 168 120 150

OM% 17.5% 21.1% 20.9% 22.1% 17.1% 20.3%

Other income (expense) net 0 1 0 2 (5) (5)

Income before Taxes 118 158 158 170 115 145

Provision for Income Taxes 19 25 25 27 19 25

Net Income 99 133 133 143 96 120

Shares outstanding 167 167 167 167 170 171

Non-GAAP Diluted EPS $0.59 $0.80 $0.80 $0.86 $0.56 $0.70

19 Page

Appendix

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Communications Aerospace and Defense Industrial, Computer,

and Semiconductor

20

An Overview of Keysight’s End Markets A market leader in electronic test and measurement solutions

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Keysight Technologies in Communications

Market size(1): $4B Long-term market growth(1): 4-6%

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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 and customer trust

• Global footprint with R&D in US, Europe and Asia

• Leader in electronic test and measurement

• Leadership in standards bodies

Broadest range of solutions across ecosystem

• Components and chipsets – Simulation tools, Network Analyzers

• Handsets – One-Box Testers for R&D and manufacturing

• Base Stations – Signal Analyzers, Sources

• Wireline / Optical – Optical Modulation Analyzers

Key new products

• Combination of bench-top and modular to deliver best solutions

• Highly differentiated wireless R&D and manufacturing platforms launched in 2014

Select Competitors

• Anritsu

• National Instruments

• Rohde & Schwarz

• Teradyne (Litepoint)

(1) Market size and growth data per Company estimates

(1) Market size and growth data per Company estimates

Keysight Technologies in Aerospace and Defense Market size(1): $3B Long-term market growth(1): Flat


• Growth of intelligence, surveillance, and reconnaissance

• Growth outside US (China, India, Middle East) driven by new satellites and radar

technologies

How We Win


• Largest installed base

• World-class, long-term service and support

• Network of system integrators and in-house capabilities

Leading technology and application solutions

• Direct wideband radar – 90000 X-Series Oscilloscopes

• Wideband radar simulation – Arbitrary Waveform Generator

• Lowest phase noise for radar – Performance Signal generators

• Best amplifier characterization for satellite communications – PNA-X

• Mission-critical network surveillance – unique contribution

Key new products

• Leading High-Performance Oscilloscopes with proprietary technology

• RF and microwave modular products with lab-quality measurements

• Industry’s highest performing handhelds

Select Competitors

• Cobham (Aeroflex)

• Danaher (Tektronix)

• Rohde & Schwarz

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Keysight Technologies in Industrial, Computers, Semiconductor Market size(1): $5B Long-term market growth(1): 3-5%

23 (1) Market size and growth data per Company estimates


• Electronic content in industrial segment continues to proliferate

• Mobile computing driven by smartphones, tablets, and notebook PCs

• Cloud computing requires high-performance infrastructure

• Semiconductor R&D-driven innovation

• Strategic investments in education and research in emerging countries

How We Win


• Award-winning products plus expanded indirect channel

• Leadership in high-speed digital standards: PCI Express, USB, HDMI

Leading technology, application solutions

• Industry-leading PCI-Express Gen3 – Oscilloscopes, Bit Error Rate Testers (BERTs),

Protocol Analyzers

• Premier battery drain characterization – Source Measure Units (SMUs)

• First THz materials research solution – Performance Network Analyzers

Key new products

• Differentiated oscilloscope offering with ease-of-use innovation and value integration

Select Competitors

• Danaher (Tektronix)

• Teledyne (LeCroy

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Wireless Modular Solutions Software

24

Opportunities to Accelerate Growth Three key areas of focus

Growth Opportunity

• Explosive mobile data growth and evolving wireless

standards drive investment in emerging networking

technologies

How Keysight will Win

• Organic and inorganic (AT4 acquired 2012)

investments driving new world-class platforms

Initial Results

• In Q1, Keysight introduced two new solutions for

wireless R&D and manufacturing. The multi-format

architecture supports 4G standards and can be

upgraded as standards evolve

Multi Format Tester

Designed for R&D and conformance;

supports multiple generations and

formats with the highest performance

and flexibility

Reduces capital cost, shrinks foot-

print and power consumption, and

increases uptime

R&D Platform

Manufacturing Platform

Transforming Product Portfolio for Growth: Wireless New wireless communications R&D and manufacturing platforms

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Transforming Product Portfolio for Growth: Modular Solutions Significant focus area to drive growth

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Growth Opportunity

• Increasing demand for flexibility and form

factor options. Modular solutions are growing

faster than overall EM market


• Leveraging industry-leading feature-rich

instrument capabilities into modular solutions

• Only company to provide top technology in

customers’ form factor choice

Initial Results

• Significant growth since launching strategy

• 100+ PXI and AXIe products launched

since 2010

Keysight’s Fast-Growing

Modular Portfolio

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Transforming Product Portfolio for Growth: Software Value migration to software solutions

27

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 software measurement

capability and functionality


• Solutions that link the simulated world to the real instrumentation world

• Consistency of measurement science across instruments, modules, software

• Expertise and standards insight enables faster delivery of solutions

• Keysight is positioned to capture software’s above-market growth rates

Initial Results

• World leader in high-frequency Electronic Design Automation (EDA)

with 10,000+ seats

• Leading provider of Test and Measurement applications software

with 1,000+ different applications

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• Simulation (R&D)

• Electronic design automation (EDA) software is used to virtually model the circuits of a new

product prior to the development of any physical electronic hardware

• Prototype (R&D)

• Includes the development of the physical hardware and software for the new product

• Objective is to uncover design errors and reduce the total time to market

• Design validation is the last step of R&D prior to releasing a product for manufacturing when all

product capabilities are rigorously tested under all conditions

• Manufacturing

• Objective is to produce the product as fast as possible at the lowest cost with few failures and

performance consistent with original design

• Installation & Maintenance

• Some customer devices are deployed in outdoor field locations

• Technicians bring test instruments to the device in the field, requiring the same measurement

capability in a compact (hand-held), rugged, weather-proof and battery-operated form factor

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Simulate Manufacture Prototype I & M

Customer New Product Introduction Workflow Keysight provides innovative and leading measurement solutions at every step

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Reconciliations

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GAAP to NON GAAP Operating profit reconciliation – Q1’14

30

KEYSIGHT TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION FROM GAAP TO NON-GAAP INCOME FROM OPERATIONS

THREE MONTHS ENDED JANUARY 31, 2014

(Unaudited)

Restructuring Acquisition & Project Sapp

and Other Intangible Transformational Integration Pre-Separation Share Based Others Adjustment

(in millions) GAAP Related Costs Amortization Initiatives Costs Costs Compensation for Taxes Non-GAAP

Net Revenue 671$ -$ -$ -$ -$ -$ -$ -$ -$ 671$

Costs and expenses:

Cost of products and services 299 1 (2) - (1) - (4) 1 - 294

Research and development 90 1 - - - - (3) (1) - 87

Selling, general and administrative 191 1 - (1) - (8) (10) (1) - 172

Total costs and expenses 580 3 (2) (1) (1) (8) (17) (1) - 553

Income from operations 91 (3) 2 1 1 8 17 1 - 118

Other Income (expense), net 1 - - - - - - - - -

Income before taxes 92 (3) 2 1 1 8 17 1 118

Provision for Income Taxes 18 - - - - - - - 1 19

Net Income 74$ (3)$ 2$ 1$ 1$ 8$ 17$ 1$ (1)$ 99$

Net income (loss) per share - Basic and Diluted:

Basic 0.44$ (0.02)$ 0.01$ 0.01$ 0.01$ 0.05$ 0.10$ 0.01$ (0.01)$ 0.59$

Diluted 0.44$ (0.02)$ 0.01$ 0.01$ 0.01$ 0.05$ 0.10$ 0.01$ (0.01)$ 0.59$

Weighted average shares used in computing net income (loss) per share:

Basic 167 167 167 167 167 167 167 167 167 167

Diluted 167 167 167 167 167 167 167 167 167 167

NON-GAAP ADJUSTMENTS

Page

GAAP to NON GAAP Operating profit reconciliation - Q2’14

KEYSIGHT TECHNOLOGIES, INC.

RECONCILIATION FROM GAAP TO NON-GAAP

NET INCOME

THREE MONTHS ENDED APRIL 30, 2014

(Unaudited)

Project Sapp

Intangible Pre-Separation Share Based Others Adjustment(In millions, except per share amounts) GAAP Amortization Costs Compensation for Taxes Non-GAAP

Net Revenue 743$ -$ -$ -$ -$ -$ 743$

Costs and expenses:

Cost of products and services 328 (2) - (3) - - 323

Research and development 89 - - (1) - - 88

Selling, general and administrative 199 - (17) (6) (1) - 175

Total costs and expenses 616 (2) (17) (10) (1) - 586

Income from operations 127 2 17 10 1 - 157

Other Income (expense), net 1 - - - - - 1

Income before taxes 128 2 17 10 1 158

Provision for Income Taxes 18 - - - - 7 25 Net Income 110$ 2$ 17$ 10$ 1$ (7)$ 133$


Basic 0.66$ 0.01$ 0.10$ 0.06$ 0.01$ (0.04)$ 0.80$

Diluted 0.66$ 0.01$ 0.10$ 0.06$ 0.01$ (0.04)$ 0.80$


Basic 167 167 167 167 167 167 167

Diluted 167 167 167 167 167 167 167

The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information.


31

Page

GAAP to NON GAAP Operating profit reconciliation - Q3’14



NET INCOME

THREE MONTHS ENDED JULY 31, 2014

(Unaudited)

Project Sapp


Net Revenue 757$ -$ -$ -$ -$ -$ 757$

Costs and expenses:

Cost of products and services 343 (2) (2) (2) - - 337

Research and development 91 - - (2) - - 89

Selling, general and administrative 202 - (24) (5) - - 173

Total costs and expenses 636 (2) (26) (9) - - 599

Income from operations 121 2 26 9 - - 158

Other Income (expense), net 1 - - - (1) - -

Income before taxes 122 2 26 9 (1) - 158

Provision for Income Taxes 15 - - - - 10 25 Net Income 107$ 2$ 26$ 9$ (1)$ (10)$ 133$


Basic 0.64$ 0.01$ 0.16$ 0.05$ (0.01)$ (0.06)$ 0.80$

Diluted 0.64$ 0.01$ 0.16$ 0.05$ (0.01)$ (0.06)$ 0.80$


Basic 167 167 167 167 167 167 167

Diluted 167 167 167 167 167 167 167



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Page




NET INCOME

THREE MONTHS ENDED OCTOBER 31, 2014

(Unaudited)

Project Sapp


Net Revenue 762$ -$ -$ -$ -$ -$ 762$

Costs and expenses:

Cost of products and services 343 (2) (4) (2) - - 335 Research and development 91 - (2) (1) - - 88 Selling, general and administrative 198 - (21) (5) (1) - 171


Income from operations 130 2 27 8 1 - 168$

Other Income (expense), net 3 - - - (1) - 2

Income before taxes 133 2 27 8 - - 170 Provision for Income Taxes 32 - - - (5) 27

Net Income 101$ 2$ 27$ 8$ -$ 5$ 143$


Basic 0.60$ 0.01$ 0.16$ 0.05$ -$ 0.03$ 0.86$

Diluted 0.60$ 0.01$ 0.16$ 0.05$ -$ 0.03$ 0.86$


Basic 167 167 167 167 167 167 167

Diluted 167 167 167 167 167 167 167



33

Page

GAAP to NON GAAP Operating profit reconciliation – FY’14



NET INCOME

YEAR ENDED OCTOBER 31, 2014

(Unaudited)

PRELIMINARY

Restructuring Acquisition & Project Sapp

and Other Intangible Transformational Integration Pre-Separation Share Based Others Adjustment

(in millions, except per share amounts) GAAP Related Costs Amortization Initiatives Costs Costs Compensation for Taxes Non-GAAP

Net Revenue 2,933$ -$ -$ -$ -$ -$ -$ -$ -$ 2,933$

Costs and expenses:

Cost of products and services 1,313 1 (8) - (1) (6) (11) 1 - 1,289

Research and development 361 1 - - - (2) (7) (1) - 352

Selling, general and administrative 790 1 - (1) - (70) (26) (3) - 691

Total costs and expenses 2,464 3 (8) (1) (1) (78) (44) (3) - 2,332

Income from operations 469 (3) 8 1 1 78 44 3 - 601

Other Income (expense), net 6 - - - - - - (3) - 3

Income before taxes 475 (3) 8 1 1 78 44 - - 604

Provision for Income Taxes 83 - - - - - - - 13 96

Net Income 392$ (3)$ 8$ 1$ 1$ 78$ 44$ -$ (13)$ 508$


Basic 2.35$ (0.02)$ 0.05$ 0.01$ 0.01$ 0.47$ 0.26$ -$ (0.08)$ 3.04$

Diluted 2.35$ (0.02)$ 0.05$ 0.01$ 0.01$ 0.47$ 0.26$ -$ (0.08)$ 3.04$


Basic 167 167 167 167 167 167 167 167 167 167

Diluted 167 167 167 167 167 167 167 167 167 167

The preliminary reconciliation from GAAP to Non-GAAP net income is estimated based on our current information


34

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KEYSIGHT TECHNOLOGIES, INC


NET INCOME

THREE MONTHS ENDED JANUARY 31, 2015

(Unaudited)

Project Sapp

Intangible Separation Share Based Adjustment(In millions, except per share amounts) GAAP Amortization costs Compensation Other for Taxes Non-GAAP

Net revenue 701$ -$ -$ -$ -$ -$ 701$

Costs and expenses:

Cost of products and services 318 (2) (1) (4) - 311

Research and development 96 - - (4) (1) 91

Selling, general and administrative 206 - (7) (21) 1 179

Total costs and expenses 620 (2) (8) (29) - - 581

Income from operations 81 2 8 29 - - 120

Other income (expense), net (3) - (1) - (1) - (5)

Income before taxes 78 2 7 29 (1) - 115

Provision (benefit) for taxes 8 - - - - 11 19

Net income 70$ 2$ 7$ 29$ (1)$ (11)$ 96$


Basic 0.42$ 0.01$ 0.04$ 0.17$ (0.01)$ (0.07)$ 0.57$

Diluted 0.41$ 0.01$ 0.04$ 0.17$ (0.01)$ (0.06)$ 0.56$


Basic 168 168 168 168 168 168 168

Diluted 170 170 170 170 170 170 170


NON GAAP ADJUSTMENTS

35

Page




NET INCOME THREE MONTHS ENDED APRIL 30, 2015

(Unaudited)

Project Sapp

Intangible Separation Share Based Asset Adjustment

(in millions, except per share amounts) GAAP Amortization Costs Compensation Impairment Other for Taxes Non-GAAP

Net Revenue 740$ -$ -$ -$ -$ -$ 740$

Costs and expenses:

Cost of products and services 324 (2) (4) - 318

Research and development 96 - - (2) 1 - 95

Selling, general and administrative 192 - (5) (7) (3) - 177


Income from operations 128 2 5 13 2 - 150

Other income(expense), net (6) - - - 2 (1) - (5)

Income before taxes 122 2 5 13 2 1 - 145

Provision for taxes 26 - - - - (1) 25

Net income 96$ 2$ 5$ 13$ 2$ 1$ 1$ 120$


Basic 0.57$ 0.01$ 0.03$ 0.08$ 0.01$ 0.01$ -$ 0.71$

Diluted 0.56$ 0.01$ 0.03$ 0.08$ 0.01$ 0.01$ -$ 0.70$


Basic 169 169 169 169 169 169 169 169

Diluted 171 171 171 171 171 171 171 171



36

Page

GAAP to NON GAAP Operating profit reconciliation – H1’15

37



SIX MONTHS ENDED APRIL 30, 2015

(Unaudited)

Intangible Separation Share Based Asset Adjustment

(in millions, except per share amounts) GAAP Amortization Costs Compensation Impairment Other for Taxes Non-GAAP

Net Revenue 1,441$ -$ -$ -$ -$ -$ -$ 1,441$

Costs and expenses:

Cost of products and services 642 (4) (1) (8) - - - 629

Research and development 192 - - (6) - - - 186

Selling, general and administrative 398 - (12) (28) - (2) - 356

Total costs and expenses 1,232 (4) (13) (42) -$ (2) -$ 1,171

Income from operations 209 4 13 42 - 2 - 270

Other income(expense), net (9) - (1) - 2 (2) - (10)

Income before taxes 200 4 12 42 2 - - 260

Provision for taxes 34 - - - - - 10 44

Net income 166$ 4$ 12$ 42$ 2$ -$ (10)$ 216$

Net income per share - Basic and Diluted:

Basic 0.99$ 0.02$ 0.07$ 0.25$ 0.01$ -$ (0.06)$ 1.29$

Diluted 0.97$ 0.02$ 0.07$ 0.25$ 0.01$ -$ (0.06)$ 1.26$


Basic 168 168 168 168 168 168 168 168

Diluted 171 171 171 171 171 171 171 171



Page

ROIC Reconciliation

(1) Consists of inventory, accounts receivable, PPE, goodwill , intangibles, deferred taxes and

allocated corporate assets

38

Year Ended October 31, (except H1'15)

$ in Millions

2014 H1'15

Non-GAAP Income from Operations 601$ 270$

Less : Taxes (91) (35)

Non-GAAP Income from Operations after Taxes 510$ 235$

Non-GAAP Income from Operations after Taxes (annualized) 510$ 470$

Assets (1)

1,976$ 1,838$

Less: Current Liabilities (498) (501)

Invested Capital 1,478$ 1,337$

Average Invested Capital 1,445$ 1,382$

ROIC 35% 34%

Page

Core Non-GAAP revenue reconciliation – Q1’15 & Q2’15

39

Percent Percent

Q2'15 Q2'14 Inc/(Dec) Q1'15 Q1'14 Inc/(Dec)

Non-GAAP Revenue 740$ 743$ — 701$ 671$ —

Less: revenue from acquisition and divestitures

included in segment results (1) — — (1) — —

Less: impact if currency adjustments 27 16

Core Non-GAAP Revenue 766$ 743$ 3% 716$ 671$ 7%



RECONCILIATION OF REVENUE EXCLUDING THE IMPACT OF CURRENCY ADJUSTMENTS

(In Millions)

(Unaudited)

Page

April 30, 2015

$ in Millions

H1'15 LTM

Non-GAAP Income from Operations 270$ 596

Plus:

Depreciation and amortization 46 91

Less: Amortization of intangible assets (4) (8)

Adjusted EBITDA 312$ 679$

% of Revenue 21.7%

Total Debt 1,099

Total Debt/Adjusted EBITDA 1.6

Non-GAAP Adjusted EBITDA Reconciliation

40

(1)

(1) Last 12 months ended April 30, 2015

Page

Free Cash Flow Reconciliation

41

Six months ended April 30, 2015

$ in Millions

H1'15

Net cash provided by operating activities 160$

Less: Investments in property, plant and equipment (31)

Free Cash Flow 129$

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