Record results delivered in last quarter

The T&M manufacturers worldwide reported a record quarter, with all-time highs for revenues, earnings and orders. However, the next quarter is fraught with uncertainty with production greatly affected by the shortage of parts supply, including semiconductors.

In the field of information and communication, 5G commercialization schedules of operators in each country are making progress smoothly. 3GPP had standardized release 16(*1), which prescribes ultralow latency communications and multiple simultaneous connections for expansion of use case in July 2020. 3GPP is now working on standards of release 17(*1), targeting improved 5G efficiency and capability, such as expansion of high-frequency range, expansion of communication area, low power consumption, and low-cost communication. Even in the United States, where adoption of commercial 5G via millimeter wave is lagging, moves toward commercialization via C-band (*2), which is in the Sub-6 GHz band, are becoming more active. In response, research and development for 5G utilization in the automotive field has begun, as well as research and demonstration experiments for building 5G networks in private domains, such as local 5G. Furthermore, research and development for the next-generation communication standard, 6G, has begun.

In 5G networks, the O-RAN Alliance has been working to open up wireless access networks so that operators can build wireless networks more flexibly. By applying the O-RAN standard specifications to base-station equipment that was previously configured with the manufacturers’ proprietary interface, it has become easier to build multi-vendor radio access networks. As a result, operators around the world are introducing O-RAN, and the 5G base-station market is vitalizing.

Since data traffic is expanding rapidly due to sophisticated cloud computing services and the progress of 5G services, the network infrastructure is under strain. To solve this issue, service providers that are pursuing higher-speed networks are concentrating on the promotion of 100Gbps services, and network equipment manufacturers are developing 400Gbps network equipment.

The Test and Measurement companies are focused on solution development for the 5G investment demand as well as improvement of organizational infrastructure.

While in the field of PQA (product quality assurance), automation investment on processed foods production lines is underway, and demand for contaminant inspection using X-rays and quality guarantee toward packaging remained steady.

Recent earnings results announced by leading players.

VIAVI SOLUTIONS
In its second fiscal quarter ended January 1, 2022, Viavi Solutions earnings results beat estimated earnings by 26.32 percent, reporting an EPS of USD 0.24 versus an estimate of USD 0.19. Revenue was up USD 14.90 million from the same period last year.

Second quarter of fiscal 2022 net revenue was USD 314.8 million. GAAP net income was USD 34.6 million, or USD 0.14 per share. Non-GAAP net income was USD 59.3 million, or USD 0.24 per share.

Americas, Asia-Pacific, and EMEA customers represented 39.9 percent, 28.9 percent, and 31.2 percent, respectively, of total net revenue for the quarter ended January 1, 2022.

Outlook for the third quarter of fiscal 2022. For the third quarter of fiscal 2022 ending April 2, 2022, the company expects net revenue to be between USD 301 million and USD 315 million and non-GAAP earnings per share to be between USD 0.20 and USD 0.22.

“NSE’s record non-GAAP operating margin at 18.7 percent reflects the strength of VIAVI’s business model, while OSP delivered a non-GAAP operating margin at 39.2 percent. We are pleased to achieve a non-GAAP EPS of USD 0.24, which ties a quarterly record high, and surpassing the guidance range of USD 0.18 to USD 0.20.”

Khaykin added, “In addition to strong business performance, we also executed well on our plan to improve our capital structure. During fiscal Q2, we redeemed USD 45.6 million in convertible notes, which brings us to approximately 47 percent retirement of the original convertible notes. As of February 2, we also repurchased approximately 10.9 million shares and exceeded the 10.6 million shares delivered during the September-2021 convertible note redemption transaction. We expect a combination of strong secular growth trends in 5G and fiber, along with our improved capital structure, to enable us to achieve our growth and shareholder return objectives.”

ANRITSU CORPORATION
For the Q3 ended December 31, 2021, revenue increased 0.9 percent, compared with the same period of the previous fiscal year to 24,632 million yen, and gross profit decreased to 12,834 million yen form 13,327 million yen in the same period last year.

Outlook. During the cumulated third-quarter of the fiscal year ending March 31, 2022, development demand for 5G chipsets and mobile devices was growing steadily. In addition, the company acquired development and production demand for network speedup in data centers. However, revenue decreased compared with the same period of previous fiscal year due to the global shortage of semiconductors. In addition, parts procurement costs and sales promotion costs increased. Its US subsidiary recorded a loss on disposal of non-current assets of 355 million yen in the second quarter.

Consequently, segment revenue decreased 1.6 percent, compared with the same period of previous fiscal year to 53,546 million yen and operating profit decreased 18.2 percent to 10,267 million yen.

Anritsu Group changed the performance forecasts announced on April 27, 2021.

KEYSIGHT TECHNOLOGIES
Keysight Technologies reported a record Q1 2022 with all-time highs for its revenues, earnings, and orders, beating its own guidance.

Among the highlights from Keysight’s results for its first quarter, ending January 31, 2022:

• Orders were up 22 percent to USD 1.5 billion during the quarter, compared to USD 1.22 billion during the previous year’s first quarter;
  Revenues were up 6 percent to USD 1.25 billion; and
• Profits for the quarter were USD 229 million, up from USD 172 million in the year-ago quarter.

By business segment, Keysight’s Communications Solutions Group (CSG) reported revenues of USD 878 million, up 3 percent. The company said those revenues were driven by “continued investments in 5G, O-RAN adoption, 400G, 800G and terabit R&D, and wireline applications.”

Outlook. Keysight’s second fiscal quarter of 2022 revenue is expected to be in the range of USD 1.29 billion to USD 1.31 billion. Non-GAAP earnings per share for the second fiscal quarter of 2022 are expected to be in the range of USD 1.63 to USD 1.69, which exclude items that pertain to future events and are not currently estimable with a reasonable degree of accuracy. No reconciliation to GAAP amounts has been provided.

SPIRENT

Financial highlights

• Orders growth of 18 percent, 14 percent organic, driven by customers’ need to support an increasing number of 5G rollouts.
• Book to bill across the year was 111; the orderbook increased USD 63 million to USD 270 million with growth in multi-year contracts across the portfolio, providing greater revenue visibility for outer years.
• Revenue up 10 percent, 7 percent organic, with strong demand for both lab, and especially live assurance solutions, as 5G networks continue to roll out globally.
• Continued R&D investment across the portfolio totaling USD 113.3 million, 20 percent of revenue.
• Adjusted operating profit increased by 14.5 percent to USD 118.5 million, with adjusted operating margin improving to 20.6 percent, up from 19.8 percent in 2020.
• Cash closed at USD 174.8 million after payment of special dividend of USD 46 million, and acquisition of octoScope.
• Full-year dividend up 12 percent (14 percent in pound sterling). Final dividend of 4.37 cents per share to be paid in May 2022.

Operational highlights

• Secured over 800 5G-related wins across all geographies, and continue to be well positioned for sustainable 5G-driven growth across our portfolio of lab and live solutions and services.
• Minimized disruption to customer shipments through proactive and aggressive management of our global supply chain.
• Implemented numerous strategic initiatives.

Outlook. The strategy of leveraging market-leading technology and expertise to address key customer business challenges is working. 5G remains an important enduring driver for Spirent and the company continues to benefit across the portfolio from customers utilizing our leading expertise and solutions.

In 2021, Spirent delivered another year of robust revenue growth and a material increase in earnings despite supply chain challenges ensuing from the pandemic, which were very effectively managed. Order intake grew 18 percent, 14 percent organic, to USD 637 million with a book to bill ratio of 111, building a strong order book for delivery in future years.

The Group is confident that it is well-set to deliver sustainable growth in 2022 and beyond.

NI
National Instruments Corporation announced Q4 2021 revenue of USD 421 million, up 14 percent year-over-year, and an all-time quarterly record.

In Q4 2021, the value of the company’s total orders was up 19 percent year-over-year, an all-time quarterly record. Geographic order growth for Q4 2021, compared with Q4 2020, was up 34 percent in the Americas, down 2 percent in APAC and up 20 percent in EMEA.

In Q4, GAAP gross margin was 71 percent and non-GAAP gross margin was 74 percent. Total Q4 GAAP operating expenses were USD 247 million, up 1 percent year-over-year. Total Q4 non-GAAP operating expenses were USD 214 million, up 9 percent year-over-year. GAAP operating margin was 12 percent in Q4, with GAAP operating income of USD 50 million. Non-GAAP operating margin was 23 percent in Q4, with non-GAAP operating income of USD 96 million, up 22 percent year-over-year.

GAAP net income for Q4 was USD 40 million, with diluted earnings per share (EPS) of USD 0.30, and non-GAAP net income was USD 80 million, with non-GAAP diluted EPS of USD 0.60.

As of December 31, 2021, NI had USD 211 million in cash with USD 143 million in cash generated from operations in 2021. During Q4, NI paid USD 36 million in dividends and repurchased approximately 740,000 shares of its common stock at an average price of USD 40.52 per share. For the year, we returned over USD 198 million to our stockholders through dividends and stock repurchases, including the repurchase of 1.3 million shares at an average price of USD 41.06 per share. The NI board of directors approved a dividend of USD 0.28 per share payable on February 28, 2022, to stockholders of record on February 7, 2022. This represents an increase of 4 percent per share.

FY 2021 highlights

• All-time record revenue of USD 1.47 billion, up 14 percent year over year;
• GAAP gross margin of 71 percent;
• Non-GAAP gross margin of 75 percent;
• Strong diluted GAAP EPS of USD 0.67;
• Record diluted non-GAAP EPS of USD 1.68; and
• Returned USD 198 million to stockholders through stock repurchase and dividends.

Q1 2022 guidance

• GAAP revenue to be in the range of USD 385 million to USD 415 million, up 19 percent year-over-year at the midpoint;
• GAAP diluted EPS to be in the range of USD 0.13 to USD 0.27, up 17 cents year-over-year at the midpoint; and
• Non-GAAP diluted EPS expected to be in the range of USD 0.35 to USD 0.49, up 31 percent year-over-year at the midpoint.

Outlook for the next quarter
The global shortage of semiconductors has had a prolonged impact on socio-economic activities, and production has also been greatly affected by the shortage of parts supply, including semiconductors.

In the T&M segment, although development demand for 5G has been strong, the outlook is expected to remain uncertain due to the effects of semiconductor shortages at some smartphone manufacturers, with short delivery times and delays in the commercialization schedule of C-band in the United States.

In the PQA segment, delivery times are expected to remain long due to the shortage of semiconductors.