10-QPeriod: Q1 FY2023

Keysight Technologies, Inc. Quarterly Report for Q1 Ended Jan 31, 2023

Filed March 3, 2023For Securities:KEYS

Summary

Keysight Technologies, Inc. reported solid financial results for the third quarter of fiscal year 2023, ended January 31, 2023. Total revenue increased by 10% year-over-year to $1,381 million, driven by growth in both the Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG). Net income saw a healthy increase of 14% to $260 million, translating to diluted earnings per share of $1.45. The company's operational efficiency is highlighted by an increase in operating margin to 23.3% from 21.7% in the prior year period. This was achieved despite a slight decrease in gross margin to 63.9% from 64.3%, attributed to higher material and people-related costs. Significant increases in interest income, driven by higher interest rates, also contributed to the bottom line. While orders saw a 13% year-over-year decline, the company's revenue growth demonstrates strong execution and demand for its solutions.

Financial Highlights

52 data points
Beta

Revenue

$1.38B

63.9% Gross Margin

Net Income

$260.00M

18.8% Net Margin

EPS (Diluted)

$1.45

Total Assets

$8.45B

Cash & Equivalents

$2.24B

Free Cash Flow

$306.00M

Financial Statements
Beta
Revenue$1.38B
Cost of Revenue$498.00M
Gross Profit$883.00M
R&D Expenses$227.00M
SG&A Expenses$338.00M
Operating Expenses$1.06B
Operating Income$322.00M
Interest Expense$19.00M
Net Income$260.00M
EPS (Basic)$1.46
EPS (Diluted)$1.45
Shares Outstanding (Basic)178.00M
Shares Outstanding (Diluted)180.00M

Key Highlights

  • 1Total revenue grew 10% year-over-year to $1,381 million, indicating continued demand for Keysight's solutions.
  • 2Net income increased by 14% to $260 million, demonstrating strong profitability.
  • 3Diluted EPS rose to $1.45 from $1.24 in the prior year, a positive sign for shareholder value.
  • 4Operating margin expanded to 23.3% from 21.7%, reflecting improved operational efficiency.
  • 5Despite a 13% decline in orders, the company successfully converted this into revenue growth, suggesting effective order management and backlog utilization.
  • 6Interest income significantly increased to $19 million from $1 million, benefiting from higher interest rates on cash balances.
  • 7Both Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG) reported year-over-year revenue growth.

Frequently Asked Questions

Revenue growth was driven by a 10% increase year-over-year to $1,381 million. Both the Communications Solutions Group (CSG) and the Electronic Industrial Solutions Group (EISG) contributed to this growth, with CSG revenue up 7% and EISG revenue up 19%. This growth was observed across all regions and end markets, supported by continued investment in next-generation technologies like 5G/6G, new mobility, and industrial IoT.

Net income increased by 14% to $260 million, or $1.45 per diluted share. While total orders saw a 13% year-over-year decrease, Keysight was able to effectively translate its backlog and current revenue generation into higher net income. This was supported by revenue growth, increased operating efficiencies leading to a higher operating margin (23.3% vs 21.7%), and a significant rise in interest income due to higher interest rates on the company's cash balances.

Keysight acknowledges ongoing macroeconomic headwinds, including inflationary pressures, financial market volatility, currency movements, geopolitical tensions, trade restrictions, and supply chain constraints. The company notes that these factors are impacting customers' spending and cautioned that demand is moderating. However, Keysight believes its diversified end-market exposure and strong business model position it well to navigate these challenges and deliver consistent value.

Inventory increased to $909 million from $858 million in the prior quarter. This increase was primarily driven by strategic stock build-up to ensure supply availability and support order fulfillment amidst ongoing supply chain uncertainties. The company is actively managing its inventory to balance supply chain resilience with demand fluctuations.