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Keysight Technologies Reports Second Quarter 2024 Results

Achieves above guidance results on strong execution; full-year outlook unchanged

SANTA ROSA, Calif., May 20, 2024--(BUSINESS WIRE)--Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the second fiscal quarter ended April 30, 2024.

"Keysight executed well and delivered second quarter results above the high end of our guidance in a market environment that was consistent with the prior quarter," said Satish Dhanasekaran, Keysight’s President and CEO. "We saw pockets of growth and stability across multiple end markets even as customer spending remained constrained. Our full-year outlook is unchanged and assumes modest order growth in the second half."

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Second Quarter Financial Summary

  • Revenue was $1.22 billion, compared with $1.39 billion in the second quarter of 2023.

  • GAAP net income was $126 million, or $0.72 per share, compared with $283 million, or $1.58 per share, in the second quarter of 2023.

  • Non-GAAP net income was $247 million, or $1.41 per share, compared with $380 million, or $2.12 per share in the second quarter of 2023.

  • Cash flow from operations was $110 million, compared to $423 million last year. Free cash flow was $74 million, compared to $370 million in the second quarter of 2023.

  • As of April 30, 2024, cash and cash equivalents totaled $1.66 billion.

Reporting Segments

  • Communications Solutions Group (CSG)

    CSG reported revenue of $840 million in the second quarter, down 10 percent from the prior year, reflecting a 10 percent decline in commercial communications, while aerospace, defense, and government decreased 11 percent.

  • Electronic Industrial Solutions Group (EISG)

    EISG reported revenue of $376 million in the second quarter, down 17 percent from the prior year, reflecting continued constraint in semiconductor and manufacturing-related customer spending.

Outlook

Keysight’s third fiscal quarter of 2024 revenue is expected to be in the range of $1.18 billion to $1.20 billion. Non-GAAP earnings per share for the third fiscal quarter of 2024 are expected to be in the range of $1.30 to $1.36, based on a weighted diluted share count of approximately 175 million shares. 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 second quarter FY2024 financial results and its third 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 "Q2 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 996630). 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," 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, 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 January 31, 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 six months ended April 30, 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

 

Six months ended

April 30,

 

April 30,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

Orders

$

1,219

 

$

1,319

 

$

2,439

 

$

2,619

 

 

Revenue

$

1,216

 

$

1,390

 

$

2,475

 

$

2,771

 

 

Costs and expenses:

Cost of products and services

 

453

 

 

481

 

 

899

 

 

979

 

Research and development

 

228

 

 

222

 

 

460

 

 

449

 

Selling, general and administrative

 

361

 

 

337

 

 

723

 

 

675

 

Other operating expense (income), net

 

(3

)

 

(4

)

 

(5

)

 

(8

)

Total costs and expenses

 

1,039

 

 

1,036

 

 

2,077

 

 

2,095

 

 

Income from operations

 

177

 

 

354

 

 

398

 

 

676

 

 

Interest income

 

18

 

 

22

 

 

41

 

 

41

 

Interest expense

 

(20

)

 

(20

)

 

(40

)

 

(39

)

Other income (expense), net

 

 

 

5

 

 

5

 

 

14

 

 

Income before taxes

 

175

 

 

361

 

 

404

 

 

692

 

 

Provision for income taxes

 

49

 

 

78

 

 

106

 

 

149

 

 

Net income

$

126

 

$

283

 

$

298

 

$

543

 

 

 

Net income per share:

Basic

$

0.73

 

$

1.59

 

$

1.71

 

$

3.04

 

Diluted

$

0.72

 

$

1.58

 

$

1.70

 

$

3.02

 

 

Weighted average shares used in computing net income per share:

Basic

 

174

 

 

178

 

 

175

 

 

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

 

April 30,

 

October 31,

 

2024

 

 

 

2023

 

 

ASSETS

 

Current assets:

Cash and cash equivalents

$

1,657

 

$

2,472

 

Accounts receivable, net

 

809

 

 

900

 

Inventory

 

1,020

 

 

985

 

Other current assets

 

482

 

 

452

 

Total current assets

 

3,968

 

 

4,809

 

 

Property, plant and equipment, net

 

769

 

 

761

 

Operating lease right-of-use assets

 

239

 

 

226

 

Goodwill

 

2,282

 

 

1,640

 

Other intangible assets, net

 

609

 

 

155

 

Long-term investments

 

102

 

 

81

 

Long-term deferred tax assets

 

668

 

 

671

 

Other assets

 

351

 

 

340

 

Total assets

$

8,988

 

$

8,683

 

 

LIABILITIES AND EQUITY

 

Current liabilities:

Current portion of long-term debt

$

600

 

$

599

 

Accounts payable

 

268

 

 

286

 

Employee compensation and benefits

 

309

 

 

304

 

Deferred revenue

 

578

 

 

541

 

Income and other taxes payable

 

62

 

 

90

 

Operating lease liabilities

 

43

 

 

40

 

Other accrued liabilities

 

134

 

 

189

 

Total current liabilities

 

1,994

 

 

2,049

 

 

Long-term debt

 

1,195

 

 

1,195

 

Retirement and post-retirement benefits

 

68

 

 

64

 

Long-term deferred revenue

 

211

 

 

216

 

Long-term operating lease liabilities

 

201

 

 

192

 

Other long-term liabilities

 

416

 

 

313

 

Total liabilities

 

4,085

 

 

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; 26.4 million shares and 25.4 million shares, respectively

 

(3,119

)

 

(2,980

)

Additional paid-in-capital

 

2,580

 

 

2,487

 

Retained earnings

 

5,909

 

 

5,611

 

Accumulated other comprehensive loss

 

(469

)

 

(466

)

Total stockholders' equity

 

4,903

 

 

4,654

 

Total liabilities and equity

$

8,988

 

$

8,683

 

 

Page 2

 

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In millions)

(Unaudited)

PRELIMINARY

 

Six months ended

April 30,

 

2024

 

 

 

2023

 

 

Cash flows from operating activities:

Net income

$

298

 

$

543

 

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

Depreciation

 

62

 

 

59

 

Amortization

 

76

 

 

49

 

Share-based compensation

 

82

 

 

84

 

Deferred tax expense (benefit)

 

(9

)

 

(2

)

Excess and obsolete inventory-related charges

 

18

 

 

13

 

Other non-cash expense (income), net

 

(5

)

 

(4

)

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

Accounts receivable

 

121

 

 

61

 

Inventory

 

(50

)

 

(93

)

Accounts payable

 

(11

)

 

(41

)

Employee compensation and benefits

 

(26

)

 

(35

)

Deferred revenue

 

14

 

 

81

 

Income taxes payable

 

(35

)

 

(32

)

Interest rate swap agreement termination proceeds

 

 

 

107

 

Prepaid assets

 

(19

)

 

(27

)

Other assets and liabilities

 

(78

)

 

26

 

Net cash provided by operating activities(a)

 

438

 

 

789

 

 

Cash flows from investing activities:

Investments in property, plant and equipment

 

(83

)

 

(113

)

Acquisition of businesses and intangible assets, net of cash acquired

 

(556

)

 

(85

)

Other investing activities

 

8

 

 

(7

)

Net cash used in investing activities

 

(631

)

 

(205

)

 

Cash flows from financing activities:

Proceeds from issuance of common stock under employee stock plans

 

33

 

 

33

 

Payment of taxes related to net share settlement of equity awards

 

(28

)

 

(47

)

Acquisition of non-controlling interests

 

(458

)

 

 

Treasury stock repurchases

 

(139

)

 

(125

)

Repayment of debt

 

(24

)

 

 

Other financing activities

 

(5

)

 

(1

)

Net cash used in financing activities

 

(621

)

 

(140

)

 

Effect of exchange rate movements

 

 

 

13

 

 

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

 

(814

)

 

457

 

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

 

2,488

 

 

2,057

 

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

$

1,674

 

$

2,514

 

 

(a) Cash payments included in operating activities:

Interest payments

$

38

 

$

37

 

Income tax paid, net

$

146

 

$

180

 

 

Page 3

 

KEYSIGHT TECHNOLOGIES, INC.

NET INCOME AND DILUTED EPS RECONCILIATION

(In millions, except per share data)

(Unaudited)

PRELIMINARY

 

Three months ended

 

Six months ended

April 30,

 

April 30,

2024

 

2023

 

2024

 

2023

Net
Income

Diluted
EPS

 

Net
Income

Diluted
EPS

 

Net
Income

Diluted
EPS

 

Net
Income

Diluted
EPS

 

GAAP Net income

$

126

 

$

0.72

 

$

283

$

1.58

$

298

 

$

1.70

 

$

543

$

3.02

Non-GAAP adjustments:

Amortization of acquisition-related balances

 

37

 

 

0.21

 

 

25

 

0.14

 

75

 

 

0.43

 

 

48

 

0.27

Share-based compensation

 

36

 

 

0.21

 

 

29

 

0.16

 

86

 

 

0.49

 

 

84

 

0.47

Acquisition and integration costs

 

27

 

 

0.15

 

 

3

 

0.02

 

40

 

 

0.23

 

 

5

 

0.03

Restructuring and others

 

23

 

 

0.14

 

 

14

 

0.07

 

38

 

 

0.22

 

 

15

 

0.08

Adjustment for taxes(a)

 

(2

)

 

(0.02

)

 

26

 

0.15

 

(4

)

 

(0.03

)

 

48

 

0.27

Non-GAAP Net income

$

247

 

$

1.41

 

$

380

$

2.12

$

533

 

$

3.04

 

$

743

$

4.14

 

Weighted average shares outstanding - diluted

 

175

 

 

179

 

175

 

 

179

(a) For the three and six months ended April 30, 2024, management uses a non-GAAP effective tax rate of 17% and for the three and six months ended April 30, 2023, management uses 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

Q2'24

Q2'23

Inc/(Dec)

Revenue

$ 840

$ 937

(10)%

Gross margin, %

68%

68%

Income from operations

$ 223

$ 266

Operating margin, %

27%

28%

 

 

Electronic Industrial Solutions Group

Percent

Q2'24

Q2'23

Inc/(Dec)

Revenue

$ 376

$ 453

(17)%

Gross margin, %

58%

64%

Income from operations

$ 71

$ 157

Operating margin, %

19%

35%

 

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.

REVENUE BY END MARKET

(In millions)

(Unaudited)

PRELIMINARY

 

Percent

Q2'24

Q2'23

Inc/(Dec)

Aerospace, Defense and Government

$ 277

$ 310

(11)%

Commercial Communications

563

627

(10)%

Electronic Industrial

376

453

(17)%

Total Revenue

$ 1,216

$ 1,390

(13)%

 

Page 6

 

KEYSIGHT TECHNOLOGIES, INC.

FREE CASH FLOW

(In millions)

(Unaudited)

PRELIMINARY

 

Three months ended

 

Six months ended

April 30,

 

April 30,

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net cash provided by operating activities

$

110

 

$

423

 

$

438

 

$

789

 

Less: Investments in property, plant and equipment

 

(36

)

 

(53

)

 

(83

)

 

(113

)

Free cash flow

$

74

 

$

370

 

$

355

 

$

676

 

 

Please refer last page for details on the use of non-GAAP financial measures.

 

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:

  • Acquisition-related Items: We exclude the impact of certain items recorded in connection with business combinations from our non-GAAP financial measures that are either non-cash or not normal, recurring operating expenses due to their nature, variability of amounts and lack of predictability as to occurrence or timing. These amounts may include non-cash items such as the amortization of acquired intangible assets and amortization of items associated with fair value purchase accounting adjustments, including recognition of acquired deferred revenue (see Non-GAAP Revenue above). We also exclude other acquisition and integration costs associated with business acquisitions that are not normal recurring operating expenses and legal, accounting and due diligence costs. We exclude these charges to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

  • Share-based Compensation Expense: We exclude share-based compensation expense from our non-GAAP financial measures because share-based compensation expense can vary significantly from period to period based on the company’s share price, as well as the timing, size and nature of equity awards granted. Management believes the exclusion of this expense facilitates the ability of investors to compare the company’s operating results with those of other companies, many of which also exclude share-based compensation expense in determining their non-GAAP financial measures.

  • Restructuring and others: We exclude incremental expenses associated with restructuring initiatives, usually aimed at material changes in the business or cost structure. Such costs may include employee separation costs, asset impairments, facility-related costs, contract termination fees, and costs to move operations from one location to another. These activities can vary significantly from period to period based on the timing, size and nature of restructuring plans; therefore, we do not consider such costs to be normal, recurring operating expenses.
    We also exclude "others", not normal, recurring, cash operating income/expenses from our non-GAAP financial measures. Such items are evaluated on an individual basis, based on both quantitative and qualitative factors and generally represent items that we do not anticipate occurring as part of our normal business. While not all-inclusive, examples of such items would include net unrealized gains on equity investments still held, significant non-recurring events like realized gains or losses associated with our employee benefit plans, costs and recoveries related to unusual events, gain on sale of assets/divestitures, adjustment attributable to non-controlling interest, etc. We believe that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to our operating performance in other periods.

  • Estimated Tax Rate: We utilize a consistent methodology for long-term projected non-GAAP tax rate. When projecting this long-term rate, we exclude any tax benefits or expenses that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. Additionally, we evaluate our current long-term projections, current tax structure and other factors, such as existing tax positions in various jurisdictions and key tax holidays in major jurisdictions where Keysight operates. This tax rate could change in the future for a variety of reasons, including but not limited to significant changes in geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where Keysight operates. The above reasons also limit our ability to reasonably estimate the future GAAP tax rate and provide a reconciliation of the expected non-GAAP earnings per share for the third quarter of fiscal 2024 to the GAAP equivalent.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20240520584461/en/

Contacts

INVESTOR CONTACT:
Jason Kary
+1 707-577-6916
jason.kary@keysight.com

MEDIA CONTACT:
Andrea Mueller
+ 1 408-218-4754
andrea.mueller@keysight.com