Achieves above guidance results on strong
execution; full-year outlook unchanged
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."
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
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version on businesswire.com: https://www.businesswire.com/news/home/20240520584461/en/
INVESTOR CONTACT: Jason Kary +1 707-577-6916
jason.kary@keysight.com
MEDIA CONTACT: Andrea Mueller + 1 408-218-4754
andrea.mueller@keysight.com
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