10-QPeriod: Q1 FY2024

Keysight Technologies, Inc. Quarterly Report for Q1 Ended Jan 31, 2024

Filed March 5, 2024For Securities:KEYS

Summary

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 billion, 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% 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 billion, reflecting the cash used for the acquisition. Keysight remains confident in its long-term growth prospects driven by innovation in key technology areas.

Financial Highlights

53 data points
Beta

Revenue

$1.26B

64.6% Gross Margin

Net Income

$176.00M

14.0% Net Margin

EPS (Diluted)

$0.98

Total Assets

$9.06B

Cash & Equivalents

$1.76B

Free Cash Flow

$281.00M

Financial Statements
Beta
Revenue$1.26B
Cost of Revenue$446.00M
Gross Profit$813.00M
R&D Expenses$232.00M
SG&A Expenses$362.00M
Operating Expenses$1.04B
Operating Income$221.00M
Interest Expense$20.00M
Net Income$176.00M
EPS (Basic)$0.98
EPS (Diluted)$0.98
Shares Outstanding (Basic)175.00M
Shares Outstanding (Diluted)176.00M

Key Highlights

  • 1Revenue decreased by 9% year-over-year to $1.259 billion for the three months ended January 31, 2024.
  • 2Net income decreased by 34% year-over-year to $172 million, resulting in diluted EPS of $0.98.
  • 3The company acquired ESI Group SA for $935 million, which contributed $68 million in revenue during the quarter.
  • 4Gross margin improved by 1 percentage point to 64.6%, driven by acquisition synergies, favorable mix, and lower variable costs.
  • 5Operating margin decreased by 6 percentage points to 17.6% due to higher operating expenses as a percentage of sales.
  • 6Cash and cash equivalents decreased from $2.47 billion to $1.75 billion, largely due to the ESI Group acquisition.
  • 7Goodwill and other intangible assets significantly increased due to the ESI Group acquisition, reflecting the integration of new capabilities.

Frequently Asked Questions

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.

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.

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.

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.