Achieves above guidance results; full-year outlook improved
SANTA ROSA, Calif. — (BUSINESS WIRE) — August 20, 2024 — 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
- Revenue was $1.22 billion, compared with $1.38 billion in the third quarter of 2023.
- GAAP net income was $389 million, or $2.22 per share, which includes a 94-cent year-to-date benefit due to a change in effective tax rate, compared with $288 million, or $1.61 per share, in the third quarter of 2023.
- Non-GAAP net income was $275 million, or $1.57 per share, which includes a 16-cent year-to-date benefit due to a change in non-GAAP tax rate, compared with $393 million, or $2.19 per share in the third quarter of 2023.
- Cash flow from operations was $255 million, compared to $241 million last year. Free cash flow was $222 million, compared to $196 million in the third quarter of 2023.
- As of July 31, 2024, cash and cash equivalents totaled $1.63 billion.
Reporting Segments
- Communications Solutions Group (CSG)
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.
- Electronic Industrial Solutions Group (EISG)
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:
- Non-GAAP Net Income/Earnings
- Non-GAAP Net Income per share/Earnings per share
- Free Cash Flow
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 | |||||||
