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T&M industry reported a strong quarter

The latest financial results show that the leading test and measurement vendors delivered an outstanding first quarter and set off on a strong start to the year with healthy order bookings.

The T&M companies results reflect increased market demand, driven by catch-up spending and early deployments of 5G, cloud-based networks, as communications service providers get a better handle on transforming their networks during the coronavirus pandemic.

Keysight Technologies, Inc. recently reported financial results for the first quarter of 2021 ended January 31, 2021. Orders grew 7 percent to reach USD 1.22 billion, compared with USD 1.14 billion last year. Revenue grew 8 percent to reach USD 1.18 billion, compared with USD 1.10 billion last year, or 6 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.

Ron Nersesian
Chairman, President and CEO

“Keysight delivered an outstanding first quarter and a strong start to the year with both revenue and earnings exceeding the high end of our guidance. Order and revenue growth in the quarter was driven by strong execution and robust demand for our broad portfolio of differentiated solutions across all regions,” said Ron Nersesian, Keysight’s Chairman, President and CEO. “We enter the year with momentum across multiple end markets and confidence in our revenue and earnings growth trajectory.”

The company’s test and measurement segment results are not reported separately. The Communications Solutions Group reported revenue of USD 852 million in the first quarter, up 4 percent over last year, driven by robust year- end spending in aerospace, defense and government across all major regions. The balance USD 328 million was from the Electronic Industrial Solutions Group.

Keysight’s second fiscal quarter of 2021 revenue is expected to be in the range of USD 1.19 billion to USD 1.21 billion.

Viavi recently reported results for its third fiscal quarter ended April 3, 2021. Third quarter of fiscal 2021 net revenue was USD 303.4 million. Second quarter of fiscal 2021 net revenue was USD 299.9 million. Third quarter of fiscal 2020 net revenue was USD 256.2 million.

Oleg Khaykin
President and Chief Executive Officer

“NSE revenue continued to see strong recovery momentum and exceeding our expectations, up 12.9 percent from a year ago levels led by strength in fiber, cable, and wireless. OSP revenue came in-line with our guidance, up 33.2 percent year- on-year due to strong demand in both anti-counterfeiting and 3D sensing. For Q4, we expect NSE revenue to continue to strengthen. OSP revenue is expected to be significantly up year-on-year, but sequentially down from a very strong fiscal Q3, driven by lower anti-counterfeiting and seasonally weaker 3D sensing demand.”

This includes network test, monitoring and assurance solutions for communications service providers, enterprises, network equipment manufacturers, government and avionics.

Americas, Asia-Pacific and EMEA customers represented 33.6 percent, 33.7 percent and 32.7 percent, respectively of total net revenue for the quarter ended April 3, 2021.

For the fourth quarter of fiscal 2021 ending July 3, 2021, the company expects net revenue to be between USD 290 million to USD 310 million and non-GAAP earnings per share to be between USD 0.18 and USD 0.20.

NI recorded its best-ever first quarter revenues of USD 335 million in Q1 2021, up 8 percent compared to the same period in 2020. Geographically, NI saw revenues up 1 percent in the Americas, down 1 percent in Europe and up 26 percent in the Asia-Pacific region.

Orders followed a somewhat similar pattern: Up 19 percent year-over-year overall, with particular strength in Asia-Pacific, where orders in the region were 51 percent higher than the first quarter of 2020. In the America, orders were up 8 percent and in EMEA, up just 2 percent.

Profits for the quarter were USD 4 million, compared to USD 132 million in the year-ago period. NI recorded slightly higher operating costs in 2021’s first quarter compared to 2020, but the first quarter of 2020 was larger than usual because NI had recorded the USD 160 million sale of its AWR subsidiary.

However, CFO Karen Rapp noted that despite the record revenues, supply chain constraints meant that not all orders were shipped within the quarter, increasing the company’s backlog. “We remain confident in our ability to ultimately ship our backlog and optimistic in the continued strength in our business as we continue to align resources to higher growth opportunities in pursuit of our long-term financial model,” Rapp added.

In addition to the impacts on shipping times, NI included in its guidance that it expects revenue in the second quarter to be constrained by component availability, although orders are still expected to be up 20-25 percent year-over-year.

EXFO recently declared its financial results for the second quarter ended February 28, 2021.

Its sales increased 25.2 percent to USUSD 69.3 million in the second quarter of fiscal 2021 from USUSD 55.3 million in the coronavirus-impacted second quarter of 2020, which had been marked by a one-month shutdown of the company’s manufacturing facility in Shenzhen, China.

T&M sales was up 36.8 percent year-over-year, while EXFO’s Service Assurance, Systems and Services (SASS) segment sales dropped 2.1 percent. Sales in the Americas and Europe, Middle East and Africa (EMEA) improved 25.7 percent and 54.7 percent year- over-year, respectively, while sales in the Asia-Pacific region fell 18.3 percent.

Philippe Morin

“EXFO delivered another solid performance in the second quarter of 2021, marked by a robust book-to-bill ratio of 1.15 and healthy cash flows from operations of USD 14.7 million,” said EXFO’s CEO Philippe Morin. “I am particularly pleased with our strong bookings that reflect increased market demand, driven by catch-up spending and early deployments of 5G, cloud-based networks, as communications service providers get a better handle on transforming their networks during the coronavirus pandemic.”

The company narrowed its losses compared to the same time last year. EXFO reported a net loss of USD 2.4 million, in the second quarter of fiscal 2021 compared to about USD 9 million during the fiscal second quarter of 2020.

Anritsu. The spread of COVID-19 has caused some customers to be cautious about capital expenditures. As a result, during the fiscal year ended March 31, 2021, orders decreased 0.1 percent compared with the previous fiscal year to 107,567 million yen, and revenue decreased 1.0 percent to 105,939 million yen. Operating profit increased 12.8 percent to 19,651 million yen, profit before tax increased 15.5 percent to 19,838 million yen. Profit increased 20.5 percent to 16,143 million yen, and profit attributable to owners of parent increased 20.6 percent to 16,105 million yen.

The test and measurement segment group develops, manufactures and sells measuring instruments and systems for a variety of communication applications, and service assurance. The group delivers them to service providers, network equipment manufacturers, and maintenance and installation companies.

During the fiscal year ended March 31, 2021, some customers remain cautious about capital expenditures because of uncertain future under spread of the COVID-19. Therefore, the vendor worked to reduce selling, general and administrative expenses by promoting operational efficiency. As a result, segment revenue decreased 5.1 percent compared with the previous fiscal year to 21,419 million yen, and operating profit increased 4.1 percent to 1,340 million yen. (1 USD may be converted at 105 yen).

The outbreak and the spread of the COVID-19 have led to a decrease in demand for several products. Moreover, manufacturing plants in a number of countries have been shut down to contain the spread of the virus.

The T&M equipment market is expected to grow from USD 27.7 billion in 2021 to USD 33.3 billion by 2026, at a CAGR of 3.7 percent. The healthcare sector is expected to exhibit the highest CAGR of 4.63 percent.

The market for general-purpose test equipment is expected to hold the largest share. These include large size, bulky displays, and slightly complicated control system and customer user interface. These characteristics are expected to change to an extent owing to the rising demand for miniature devices and the strong focus of T&M equipment manufacturers on integrating different types of equipment into one offering. The market for the repair services and after-sales services industry is anticipated to grow at highest CAGR.

The rising adoption of MIMO for 5G new radio technology is expected to lead to the increased use of T&M equipment for the performance evaluation of the radiation patterns of the device under test. As such, antenna arrays are used for high antenna gain from beamforming to compensate for the free space path loss occurring from high-frequency 5G systems. For instance, antenna arrays need to be calibrated for the frequency drift, which occurs due to the non-usage of a common local oscillator (LO) network between modules.

The costs involved in the installation of T&M equipment and the establishment of testing facilities are high. Moreover, expert professionals are required to operate testing and measurement equipment and perform tests in accordance with the regulations and directives applicable to devices being tested. Many medium-sized and small companies have a lower budget. They demand low-cost T&M equipment but are not ready to compromise on the quality of devices and their additional features. This leads to increased pressure on the manufacturers of testing and measurement devices to lower their costs.

The T&M industry recently saw three acquisitions. In May 2021, three companies consolidated their positions and acquired companies that complement their operations and lay the foundation for further growth.

PCTEL, Inc., a leading global provider of wireless technology, including purpose-built Industrial IoT devices, antenna systems, and test and measurement solutions, headquartered in Bloomingdale, Illionois, USA on May 3, 2021 acquired Swedish company, Smarteq Wireless AB, a leading European supplier of antennas for vehicular, energy and Industrial IoT (IIoT) applications. PCTEL acquired Smarteq from Allgon AB for about USD 6.8 million.

“Our antenna business was stable and the test and measurement products continue to perform very well as we address 5G deployments and emerging public safety opportunities,” said David Neumann, PCTel’s CEO “We expect market conditions and the demand for our antenna, IoT device and scanner products to improve through the year as global economies recover.”

Another, larger T&M acquisition hit the same week as well. On May 4, 2021, Ametek, Inc. announced that it had acquired NSI-MI Technologies, a leading provider of radio frequency and microwave test and measurement solutions and services. NSI-MI was acquired for USD 230 million and has annual sales of approximately USD 90 million.

NSI-MI’s expertise in advanced radio frequency and microwave technologies allows them to provide complete test and measurement systems for niche applications across the aerospace, defense, automotive, wireless communications, and research markets. The company has a diverse portfolio of testing instrumentation, components and software, while also providing customers with turnkey anechoic and simulation chambers, and a broad set of aftermarket services.

“We are pleased to welcome NSI-MI to AMETEK,” comments David A. Zapico, AMETEK Chairman and Chief Executive Officer. “NSI-MI is an outstanding acquisition and nicely complements our existing Electromagnetic Compatibility test and measurement businesses. NSI-MI’s test and measurement solutions are uniquely positioned to support the continued development of advanced RF and microwave technologies for critical applications in wireless communications, satellite systems, autonomous vehicles, and defense systems.”

NSI-MI is headquartered in Suwanee, Georgia with additional operations in Torrance, California and Sheffield, U.K. NSI-MI joins AMETEK as part of its Electronic Instruments Group (EIG) – a leader in advanced analytical, monitoring, testing, calibrating and display instrumentation.

Dekra of Berlin, Germany on May 6, 2021 announced its acquisition of Centro Misure Compatibilitá (CMC), a lab in Thiene, Italy which conducts electromagnetic compatibility (EMC) and radio frequency testing along with electrical safety, reliability testing and construction products. This acquisition sees Dekra further expand its global network of laboratories for electromagnetic compatibility (EMC) and radio frequency (RF) testing. As a result, Dekra is further consolidating its position as a global provider of future-ready testing and certification services as well as laying the foundation for further growth in the region.

“CMC significantly strengthens Dekra’s global laboratory network for regulatory testing services for all key markets and rounds off Dekra’s range of services Italy, one of the largest industrial markets in Europe,” said Fernando E. Hardasmal, EVP of Dekra’s service division product testing. “We see lot of important areas of synergy in light of CMC’s state-of-the-art facilities, its experienced team, and its customer base in the automotive, medical, rail, maritime, consumer, and professional and household electronics markets – sectors in which Dekra has a wide range of additional services to offer, such as cybersecurity, wireless, and global market access.”

Separately, Dekra publicly touted its employment stability during the course of the global pandemic, saying that it continued to grow its core employee base by 400 positions and plans to add another 1,000 jobs this year on a global basis by expanding its digital services. The testing and certification company said that it sees cybersecurity and artificial intelligence as “key future fields” and that its CEO Stefan Kölbl “regards 2021 as a year of enthusiasm for new beginnings with new shores of growth.”

Dekra also said that it plans to have its entire service portfolio digitalized by 2025.

All in all, the T&M industry fared well in these challenging times.

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