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Keysight Technologies Reports Third Quarter 2024 Results

August 20, 2024 4:05 PM

Achieves above guidance results; full-year outlook improved

SANTA ROSA, Calif.--(BUSINESS WIRE)-- Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the third fiscal quarter ended July 31, 2024.

“Keysight delivered revenue and earnings above the high end of our guidance in market conditions that were stable and consistent with our expectations,” said Satish Dhanasekaran, Keysight’s President and CEO. “The funnel of opportunities supports our outlook for second half orders to be above first half orders, followed by a more gradual recovery in 2025, barring any further macroeconomic degradation."

Third Quarter Financial Summary

Reporting Segments

CSG reported revenue of $847 million in the third quarter, down 8 percent from the prior year, reflecting a 6 percent decline in commercial communications, while aerospace, defense, and government decreased 10 percent.

EISG reported revenue of $370 million in the third quarter, down 20 percent from the prior year, reflecting continued restraint in general electronics, automotive, and manufacturing-related customer spending.

Outlook

Keysight’s fourth fiscal quarter of 2024 revenue is expected to be in the range of $1.245 billion to $1.265 billion. Non-GAAP earnings per share for the fourth fiscal quarter of 2024 are expected to be in the range of $1.53 to $1.59, based on a weighted diluted share count of approximately 174 million shares and a non-GAAP tax rate of 14%. Certain items impacting the GAAP tax rate pertain to future events and are not currently estimable with a reasonable degree of accuracy; therefore, no reconciliation of GAAP earnings per share to non-GAAP has been provided. Further information is discussed in the section titled “Use of Non-GAAP Financial Measures” below.

Webcast

Keysight’s management will present more details about its third quarter FY2024 financial results and its fourth quarter FY2024 outlook on a conference call with investors today at 1:30 p.m. PT. This event will be webcast in listen-only mode. Listeners may log on to the call at www.investor.keysight.com under the “Upcoming Events” section and select “Q3 FY24 Keysight Technologies Inc. Earnings Conference Call” to participate. The call can also be accessed by dialing 1-404-975-4839 or 1-833-470-1428 toll-free (access code 711647). The webcast will remain on the company site for 90 days.

Forward-Looking Statements

This communication contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The words "assume," “expect,” “intend,” “will,” “should,” "outlook" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could significantly affect the expected results and are based on certain key assumptions of Keysight’s management and on currently available information. Due to such uncertainties and risks, no assurances can be given that such expectations or assumptions will prove to have been correct, and readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Keysight undertakes no responsibility to publicly update or revise any forward-looking statement. The forward-looking statements contained herein include, but are not limited to, predictions, future guidance, projections, beliefs, and expectations about the company’s goals, revenues, financial condition, earnings, and operations that involve risks and uncertainties that could cause Keysight’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, impacts of global economic conditions such as inflation or recession, uncertainty relating to national elections and election results in the U.S. and U.K., slowing demand for products or services, volatility in financial markets, reduced access to credit, increased interest rates; impacts of geopolitical tension and conflict outside of the U.S., export control regulations and compliance; net zero emissions commitments; customer purchasing decisions and timing; and order cancellations.

In addition to the risks above, other risks that Keysight faces include those detailed in Keysight’s filings with the Securities and Exchange Commission on Keysight’s yearly report on Form 10-K for the period ended October 31, 2023, and Keysight’s quarterly report on Form 10-Q for the period ended April 30, 2024.

Segment Data

Segment data reflect the results of our reportable segments under our management reporting system. Segment data are provided on page 5 of the attached tables.

Use of Non-GAAP Financial Measures

In addition to financial information prepared in accordance with U.S. GAAP (“GAAP”), this document also contains certain non-GAAP financial measures based on management’s view of performance, including:

Net Income per share is based on weighted average diluted share count. See the attached supplemental schedules for reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure for both the three and nine months ended July 31, 2024. Following the reconciliations is a discussion of the items adjusted from our non-GAAP financial measures and the company’s reasons for including or excluding certain categories of income or expenses from our non-GAAP results.

About Keysight Technologies

At Keysight (NYSE: KEYS), we inspire and empower innovators to bring world-changing technologies to life. As an S&P 500 company, we’re delivering market-leading design, emulation, and test solutions to help engineers develop and deploy faster, with less risk, throughout the entire product lifecycle. We’re a global innovation partner enabling customers in communications, industrial automation, aerospace and defense, automotive, semiconductor, and general electronics markets to accelerate innovation to connect and secure the world. Learn more at Keysight Newsroom and www.keysight.com.

KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)
PRELIMINARY
Three months ended Nine months ended
July 31, July 31,

2024

2023

2024

2023

Orders

$

1,249

$

1,244

$

3,688

$

3,863

Revenue

$

1,217

$

1,382

$

3,692

$

4,153

Costs and expenses:
Cost of products and services

462

486

1,361

1,465

Research and development

226

215

686

664

Selling, general and administrative

329

319

1,052

994

Other operating expense (income), net

(5

)

(3

)

(10

)

(11

)

Total costs and expenses

1,012

1,017

3,089

3,112

Income from operations

205

365

603

1,041

Interest income

19

29

60

70

Interest expense

(21

)

(19

)

(61

)

(58

)

Other income (expense), net

10

14

15

28

Income before taxes

213

389

617

1,081

Provision (benefit) for income taxes

(176

)

101

(70

)

250

Net income

$

389

$

288

$

687

$

831

Net income per share:
Basic

$

2.23

$

1.62

$

3.94

$

4.66

Diluted

$

2.22

$

1.61

$

3.92

$

4.63

Weighted average shares used in computing net income per share:
Basic

174

178

174

178

Diluted

175

179

175

179

Page 1
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share data)
(Unaudited)
PRELIMINARY
July 31, 2024 October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents

$

1,632

$

2,472

Accounts receivable, net

802

900

Inventory

1,026

985

Other current assets

536

452

Total current assets

3,996

4,809

Property, plant and equipment, net

776

761

Operating lease right-of-use assets

234

226

Goodwill

2,391

1,640

Other intangible assets, net

637

155

Long-term investments

107

81

Long-term deferred tax assets

678

671

Other assets

504

340

Total assets

$

9,323

$

8,683

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt

$

600

$

599

Accounts payable

280

286

Employee compensation and benefits

262

304

Deferred revenue

537

541

Income and other taxes payable

85

90

Operating lease liabilities

43

40

Other accrued liabilities

142

189

Total current liabilities

1,949

2,049

Long-term debt

1,196

1,195

Retirement and post-retirement benefits

71

64

Long-term deferred revenue

207

216

Long-term operating lease liabilities

197

192

Other long-term liabilities

473

313

Total liabilities

4,093

4,029

Stockholders' Equity:
Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding

Common stock; $0.01 par value; 1 billion shares authorized; issued and outstanding shares: 201 million and 200 million, respectively

2

2

Treasury stock, at cost; 27.5 million shares and 25.4 million shares, respectively

(3,270

)

(2,980

)

Additional paid-in-capital

2,637

2,487

Retained earnings

6,298

5,611

Accumulated other comprehensive loss

(437

)

(466

)

Total stockholders' equity

5,230

4,654

Total liabilities and equity

$

9,323

$

8,683

Page 2
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
Nine months ended
July 31,

2024

2023

Cash flows from operating activities:
Net income

$

687

$

831

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation

94

90

Amortization

108

72

Share-based compensation

111

110

Deferred tax expense (benefit)

(21

)

10

Excess and obsolete inventory-related charges

26

19

Other non-cash expense (income), net

(5

)

(13

)

Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable

130

32

Inventory

(51

)

(126

)

Accounts payable

(4

)

(54

)

Employee compensation and benefits

(69

)

(87

)

Deferred revenue

(35

)

41

Income taxes payable

(24

)

(28

)

Interest rate swap agreement termination proceeds

107

Prepaid assets

(25

)

(33

)

Long-term tax receivable

(165

)

Other assets and liabilities

(64

)

59

Net cash provided by operating activities(a)

693

1,030

Cash flows from investing activities:
Investments in property, plant and equipment

(116

)

(158

)

Acquisition of businesses and intangible assets, net of cash acquired

(673

)

(85

)

Other investing activities

8

(7

)

Net cash used in investing activities

(781

)

(250

)

Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans

65

67

Payment of taxes related to net share settlement of equity awards

(31

)

(49

)

Acquisition of non-controlling interests

(458

)

Treasury stock repurchases

(289

)

(276

)

Repayment of debt

(24

)

Other financing activities

(16

)

(1

)

Net cash used in financing activities

(753

)

(259

)

Effect of exchange rate movements

2

10

Net increase (decrease) in cash, cash equivalents, and restricted cash

(839

)

531

Cash, cash equivalents, and restricted cash at beginning of period

2,488

2,057

Cash, cash equivalents, and restricted cash at end of period

$

1,649

$

2,588

(a) Cash payments included in operating activities:
Interest payments

$

38

$

37

Income tax paid, net

$

130

$

268

Page 3
KEYSIGHT TECHNOLOGIES, INC.
NET INCOME AND DILUTED EPS RECONCILIATION
(In millions, except per share data)
(Unaudited)
PRELIMINARY
Three months ended Nine months ended
July 31, July 31,

2024

2023

2024

2023

Net
Income
Diluted
EPS
Net
Income
Diluted
EPS
Net
Income
Diluted
EPS
Net
Income
Diluted
EPS
GAAP Net income

$

389

$

2.22

$

288

$

1.61

$

687

$

3.92

$

831

$

4.63

Non-GAAP adjustments:
Amortization of acquisition-related balances

31

0.18

23

0.13

106

0.60

71

0.39

Share-based compensation

32

0.18

27

0.15

118

0.68

111

0.62

Acquisition and integration costs

16

0.09

7

0.04

56

0.32

12

0.07

Restructuring and others

6

0.03

1

0.01

44

0.25

16

0.09

Adjustment for taxes(a)

(199

)

(1.13

)

47

0.25

(203

)

(1.16

)

95

0.53

Non-GAAP Net income

$

275

$

1.57

$

393

$

2.19

$

808

$

4.61

$

1,136

$

6.33

Weighted average shares outstanding - diluted

175

179

175

179

(a) During the quarter, we amended our tax returns to reflect $165 million, an amortization deduction related to a prior-period corporate restructuring. This reduced our effective non-GAAP tax rate for the nine months ended July 31, 2024 from 17% to 14% and for the three months ended July 31, 2024 to 8%. For the three and nine months ended July 31, 2023, management used a non-GAAP effective tax rate of 12%.
Please refer last page for details on the use of non-GAAP financial measures.

Page 4

KEYSIGHT TECHNOLOGIES, INC.
SEGMENT RESULTS INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
Communications Solutions Group Percent
Q3'24 Q3'23 Inc/(Dec)
Revenue

$

847

$

918

(8)%

Gross margin, %

67%

68%

Income from operations

$

223

$

276

Operating margin, %

26%

30%

Electronic Industrial Solutions Group Percent
Q3'24 Q3'23 Inc/(Dec)
Revenue

$

370

$

464

(20)%

Gross margin, %

58%

62%

Income from operations

$

74

$

157

Operating margin, %

20%

34%

Segment revenue and income from operations are consistent with the respective non-GAAP financial measures as discussed on last page.
Page 5
KEYSIGHT TECHNOLOGIES, INC.
FREE CASH FLOW
(In millions)
(Unaudited)
PRELIMINARY
Three months ended
July 31,

2024

2023

Net cash provided by operating activities

$

255

$

241

Less: Investments in property, plant and equipment

(33

)

(45

)

Free cash flow

$

222

$

196

Please refer last page for details on the use of non-GAAP financial measures.
Page 6
KEYSIGHT TECHNOLOGIES, INC.
REVENUE BY END MARKETS
(In millions)
(Unaudited)
PRELIMINARY
Percent
Q3'24 Q3'23 Inc/(Dec)
Aerospace, Defense and Government

$

275

$

307

(10)%

Commercial Communications

572

611

(6)%

Electronic Industrial

370

464

(20)%

Total Revenue

$

1,217

$

1,382

(12)%

Page 7

Non-GAAP Financial Measures

Management uses both GAAP and non-GAAP financial measures to analyze and assess the overall performance of the business, to make operating decisions and to forecast and plan for future periods. We believe that our investors benefit from seeing our results “through the eyes of management” in addition to seeing our GAAP results. This information enhances investors’ understanding of the continuing performance of our business and facilitates comparison of performance to our historical and future periods.

Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies, including industry peer companies, limiting the usefulness of these measures for comparative purposes.

These non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The discussion below presents information about each of the non-GAAP financial measures and the company’s reasons for including or excluding certain categories of income or expenses from our non-GAAP results. In future periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, adjustments for these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual.

Non-GAAP Revenue generally relates to an acquisition and includes recognition of acquired deferred revenue that was written down to fair value in purchase accounting. Management believes that excluding fair value purchase accounting adjustments more closely correlates with the ordinary and ongoing course of the acquired company’s operations and facilitates analysis of revenue growth and business trends. We may not have non-GAAP revenue in all periods.

Core Revenue is GAAP/non-GAAP revenue (as applicable) excluding the impact of foreign currency changes and revenue associated with material acquisitions or divestitures completed within the last twelve months. We exclude the impact of foreign currency changes as currency rates can fluctuate based on factors that are not within our control and can obscure revenue growth trends. As the nature, size and number of acquisitions can vary significantly from period to period and as compared to our peers, we exclude revenue associated with recently acquired businesses to facilitate comparisons of revenue growth and analysis of underlying business trends.

Free cash flow includes net cash provided by operating activities adjusted for investments in property, plant & equipment.

Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP Diluted EPS may include the following types of adjustments:

Management recognizes these items can have a material impact on our cash flows and/or our net income. Our GAAP financial statements, including our Condensed Consolidated Statement of Cash Flows, portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded costs are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company’s profit and loss from any and all events, management does (and investors should) rely upon the Condensed Consolidated Statement of Operations prepared in accordance with GAAP. The non-GAAP measures focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company’s performance.

Page 8

Source: IR-KEYS

INVESTOR CONTACT:

Jason Kary

+1 707-577-6916

[email protected]

MEDIA CONTACT:

Claire Rowberry

+ 1 339-200-9518

[email protected]

Source: Keysight Technologies, Inc.

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