01—Abstract
Summary
Summary of the 10-Q filed May 31, 2024. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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.
02—Key points
Key Highlights
- Total revenue for the three months ended April 30, 2024, was $1.216 billion, a 13% decrease year-over-year.
- Net income for the three months ended April 30, 2024, was $126 million, a 55% decrease year-over-year.
- Diluted net income per share decreased to $0.72 from $1.58 in the prior year's comparable period.
- The 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.
- Operating 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.
- Cash and cash equivalents decreased to $1.657 billion from $2.472 billion at the beginning of the fiscal year.
- The 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Keysight Technologies, Inc. kept $0.10.
- Revenue$1.22B100.0%
- Cost of revenue−$453.0M37.3%
- Gross profit$763.0M62.7%
- Operating costs−$586.0M48.2%
- Operating income$177.0M14.6%
- Interest, other & tax−$51.0M4.2%
- Net income$126.0M10.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed May 31, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.22B$1.39B | −12.5% |
| Cost of Revenue | $453.00M$481.00M | −5.8% |
| Gross Profit | $763.00M$909.00M | −16.1% |
| R&D Expenses | $228.00M$222.00M | +2.7% |
| SG&A Expenses | $361.00M$337.00M | +7.1% |
| Operating Expenses | $1.04B$1.04B | +0.3% |
| Operating Income | $177.00M$354.00M | −50.0% |
| Net Income | $126.00M$283.00M | −55.5% |
| EPS (Basic) | $0.73$1.59 | −54.1% |
| EPS (Diluted) | $0.72$1.58 | −54.4% |
| Shares Outstanding (Basic) | 174.00M178.00M | −2.2% |
| Shares Outstanding (Diluted) | 175.00M179.00M | −2.2% |
05—Questions
Frequently Asked Questions
What were the primary drivers for the decrease in revenue and net income?
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.
How did the acquisition of ESI Group impact the financial results?
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.
What is Keysight's outlook for future growth, despite the current headwinds?
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.
What is the significance of the announced acquisition of Spirent Communications PLC?
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.
06—Continue