10-QPeriod: Q2 FY2024

Keysight Technologies, Inc. Quarterly Report for Q2 Ended Apr 30, 2024

Filed May 31, 2024For Securities:KEYS

Summary

Keysight Technologies, Inc. reported a decline in revenue and net income for the second quarter and the first half of fiscal year 2024 compared to the prior year. Revenue for the quarter decreased by 13% to $1.216 billion, and net income fell by 55% to $126 million. This downturn is attributed to challenging macroeconomic headwinds, including increased interest rates, inflation, and geopolitical tensions, which have led customers to exercise caution in their spending. Despite the top-line pressures, the company continues to invest in R&D to support innovation in key growth areas like 5G, AI, electric vehicles, and satellite networks. The acquisition of ESI Group SA, completed in the first quarter of fiscal 2024, contributed to revenue but also increased acquisition and integration costs. Management remains confident in the long-term growth trends of its markets and its ability to navigate the current environment.

Financial Highlights

53 data points
Beta

Revenue

$1.22B

62.7% Gross Margin

Net Income

$126.00M

10.4% Net Margin

EPS (Diluted)

$0.72

Total Assets

$8.99B

Cash & Equivalents

$1.67B

Free Cash Flow

$74.00M

Financial Statements
Beta
Revenue$1.22B
Cost of Revenue$453.00M
Gross Profit$763.00M
R&D Expenses$228.00M
SG&A Expenses$361.00M
Operating Expenses$1.04B
Operating Income$177.00M
Net Income$126.00M
EPS (Basic)$0.73
EPS (Diluted)$0.72
Shares Outstanding (Basic)174.00M
Shares Outstanding (Diluted)175.00M

Key Highlights

  • 1Total revenue for the three months ended April 30, 2024, was $1.216 billion, a 13% decrease year-over-year.
  • 2Net income for the three months ended April 30, 2024, was $126 million, a 55% decrease year-over-year.
  • 3Diluted net income per share decreased to $0.72 from $1.58 in the prior year's comparable period.
  • 4The company completed the acquisition of ESI Group SA for $935 million in the first quarter of fiscal 2024, which contributed $26 million to revenue in the current quarter.
  • 5Operating margin declined to 14.6% from 25.4% in the prior year's comparable period due to lower revenue and higher operating expenses as a percentage of sales.
  • 6Cash and cash equivalents decreased to $1.657 billion from $2.472 billion at the beginning of the fiscal year.
  • 7The company announced a planned acquisition of Spirent Communications PLC for approximately $1.463 billion, expected to close in the first half of fiscal year 2025.

Frequently Asked Questions

The decrease in revenue and net income was primarily driven by challenging macroeconomic headwinds, including increased interest rates, inflation, geopolitical tensions, and trade restrictions, which have led customers to exercise caution and reduce their spending. Additionally, a strong compare to the prior year also contributed to the year-over-year decline.

The acquisition of ESI Group SA, completed in the first quarter of fiscal 2024, contributed $26 million in revenue for the current quarter. However, it also led to increased acquisition and integration costs, as well as higher amortization of acquisition-related balances, which negatively impacted profitability.

Keysight remains confident in the long-term growth trends of its markets, driven by investments in next-generation technologies such as 5G evolution, 6G, high-speed data center networks, AI, electric vehicles, and defense modernization. The company's strategy of delivering first-to-market solutions and maintaining strong customer relationships positions it to outperform in various market conditions.

The planned acquisition of Spirent Communications PLC for approximately $1.463 billion is a significant strategic move aimed at expanding Keysight's capabilities. Spirent provides advanced testing and assurance solutions for networks, semiconductors, and connected devices, which are complementary to Keysight's existing portfolio, particularly in areas like high-speed networking and 5G/6G technologies. The acquisition is expected to close in the first half of fiscal year 2025, pending regulatory approvals.