01—Abstract
Summary
Summary of the 10-Q filed March 5, 2024. Cited figures are marked; the original filing is the authoritative source.
Keysight Technologies, Inc. reported a decrease in revenue and net income for the third quarter of fiscal year 2024 compared to the prior year.
Total revenue declined by 9% to $1.26 billiona, while net income fell by 34% to $172 million, or $0.98 per diluted share. This decline was attributed to macroeconomic headwinds, a challenging geopolitical environment, and a cautious customer spending approach. The company completed the acquisition of ESI Group for $935 million, which contributed $68 million to revenue in the quarter and expanded its simulation capabilities.
Despite the year-over-year decrease, Keysight's gross margin improved slightly to 64.6%b due to favorable mix and cost efficiencies, partially offset by acquisition-related expenses and restructuring costs. R&D expenses increased as a percentage of revenue due to the ESI Group acquisition, while SG&A expenses also rose.
The company's balance sheet shows a significant increase in goodwill and intangible assets due to the acquisition, alongside a decrease in cash and cash equivalents from $2.47 billion to $1.75 billionc, reflecting the cash used for the acquisition. Keysight remains confident in its long-term growth prospects driven by innovation in key technology areas.
02—Key points
Key Highlights
- Revenue decreased by 9% year-over-year to $1.259 billion for the three months ended January 31, 2024.
- Net income decreased by 34% year-over-year to $172 million, resulting in diluted EPS of $0.98.
- The company acquired ESI Group SA for $935 million, which contributed $68 million in revenue during the quarter.
- Gross margin improved by 1 percentage point to 64.6%, driven by acquisition synergies, favorable mix, and lower variable costs.
- Operating margin decreased by 6 percentage points to 17.6% due to higher operating expenses as a percentage of sales.
- Cash and cash equivalents decreased from $2.47 billion to $1.75 billion, largely due to the ESI Group acquisition.
- Goodwill and other intangible assets significantly increased due to the ESI Group acquisition, reflecting the integration of new capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Keysight Technologies, Inc. kept $0.14.
- Revenue$1.26B100.0%
- Cost of revenue−$446.0M35.4%
- Gross profit$813.0M64.6%
- Operating costs−$592.0M47.0%
- Operating income$221.0M17.6%
- Interest, other & tax−$45.0M3.6%
- Net income$176.0M14.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed March 5, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.26B$1.38B | −8.8% |
| Cost of Revenue | $446.00M$498.00M | −10.4% |
| Gross Profit | $813.00M$883.00M | −7.9% |
| R&D Expenses | $232.00M$227.00M | +2.2% |
| SG&A Expenses | $362.00M$338.00M | +7.1% |
| Operating Expenses | $1.04B$1.06B | −2.0% |
| Operating Income | $221.00M$322.00M | −31.4% |
| Interest Expense | $20.00M$19.00M | +5.3% |
| Net Income | $176.00M$260.00M | −32.3% |
| EPS (Basic) | $0.98$1.46 | −32.9% |
| EPS (Diluted) | $0.98$1.45 | −32.4% |
| Shares Outstanding (Basic) | 175.00M178.00M | −1.7% |
| Shares Outstanding (Diluted) | 176.00M180.00M | −2.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of the decrease in net income?
The primary drivers for the decrease in net income were lower revenue, higher restructuring costs, amortization of acquisition-related balances, and incremental operating expenses related to the ESI Group acquisition, partially offset by incremental gross margin impact from the acquisition, favorable mix, and lower variable people-related costs.
How did the acquisition of ESI Group impact Keysight's financial statements?
The acquisition of ESI Group for $935 million significantly increased Keysight's goodwill and other intangible assets. It contributed $68 million to revenue in the quarter and incurred associated acquisition and integration costs. The acquisition also led to an increase in R&D and SG&A expenses.
What is Keysight's outlook for the future, given the current macroeconomic challenges?
Keysight remains confident in its long-term growth prospects driven by customer investments in next-generation technologies such as 5G/6G, high-speed data centers, AI-ML, automotive, and IoT. The company continues to monitor the macroeconomic environment and believes its technology leadership and resilient business model position it to outperform in various market conditions.
How did the company's cash position change during the quarter?
Keysight's cash and cash equivalents decreased from $2.47 billion at the beginning of the quarter to $1.75 billion at the end of the quarter. This reduction was primarily due to the cash used to fund the acquisition of ESI Group.
06—Continue