10-QPeriod: Q3 FY2024

Keysight Technologies, Inc. Quarterly Report for Q3 Ended Jul 31, 2024

Filed August 29, 2024For Securities:KEYS

Summary

Keysight Technologies, Inc. reported a revenue of $1.217 billion for the third quarter of fiscal year 2024, a 12% decrease compared to the same period last year. Net income for the quarter was $389 million, or $2.22 per diluted share, a significant increase from $288 million in the prior year, largely driven by a substantial income tax benefit from discrete items. For the first nine months of fiscal 2024, revenue was $3.692 billion, down 11% year-over-year, with net income at $687 million, a decrease from $831 million in the prior year. The company completed several acquisitions during the period, including ESI Group, Riscure Holding B.V., and AnaPico AG, which contributed to an increase in goodwill and intangible assets. Despite a challenging macroeconomic environment impacting demand, Keysight remains focused on strategic investments in R&D and long-term growth opportunities in areas like 5G, 6G, AI, and automotive. Financially, the company demonstrated operational discipline, with cash flow from operations at $693 million for the nine-month period, though this was lower than the previous year. Investing activities were significantly impacted by acquisitions, totaling $781 million. Financing activities also saw increased usage of cash, notably for the acquisition of non-controlling interests. The company maintained a strong balance sheet with $1.632 billion in cash and cash equivalents. The company also announced its intention to acquire Spirent Communications PLC for approximately $1.463 billion, indicating continued strategic inorganic growth focus.

Financial Highlights

53 data points
Beta

Revenue

$1.22B

62.0% Gross Margin

Net Income

$389.00M

32.0% Net Margin

EPS (Diluted)

$2.22

Total Assets

$9.32B

Cash & Equivalents

$1.65B

Free Cash Flow

$222.00M

Financial Statements
Beta
Revenue$1.22B
Cost of Revenue$462.00M
Gross Profit$755.00M
R&D Expenses$226.00M
SG&A Expenses$329.00M
Operating Expenses$1.01B
Operating Income$205.00M
Net Income$389.00M
EPS (Basic)$2.23
EPS (Diluted)$2.22
Shares Outstanding (Basic)174.00M
Shares Outstanding (Diluted)175.00M

Key Highlights

  • 1Total revenue for Q3 FY24 decreased 12% year-over-year to $1.217 billion.
  • 2Net income for Q3 FY24 increased to $389 million ($2.22/share) from $288 million ($1.61/share) in Q3 FY23, primarily due to a significant $179 million discrete tax benefit.
  • 3For the nine months ended July 31, 2024, revenue declined 11% to $3.692 billion, and net income decreased 17% to $687 million ($3.92/share).
  • 4The company made significant acquisitions, including ESI Group, Riscure Holding B.V., and AnaPico AG, leading to a substantial increase in goodwill and intangible assets.
  • 5Operating margin for Q3 FY24 compressed to 16.8% from 26.4% in the prior year, reflecting lower revenue and increased operating expenses.
  • 6Cash flow from operations for the nine months ended July 31, 2024 was $693 million, down from $1.030 billion in the prior year, impacted by lower net income and changes in working capital.
  • 7Keysight announced its intention to acquire Spirent Communications PLC for approximately $1.463 billion, signaling continued strategic growth ambitions.

Frequently Asked Questions

For the third quarter of fiscal year 2024, Keysight Technologies reported total revenue of $1.217 billion, a decrease of 12% compared to the same period last year. Net income for the quarter was $389 million, or $2.22 per diluted share, an increase from $288 million, or $1.61 per diluted share, in the prior year. This increase in net income was largely attributable to a significant discrete tax benefit of $179 million recognized during the quarter.

Keysight completed several acquisitions during the period, including ESI Group SA, Riscure Holding B.V., and AnaPico AG. These acquisitions contributed $25 million in revenue for the third quarter and $119 million for the nine-month period. The acquisitions also led to a significant increase in goodwill and intangible assets on the balance sheet, with $743 million in goodwill and $582 million in intangible assets added during the nine months ended July 31, 2024.

Keysight acknowledges a challenging macroeconomic environment characterized by high interest rates, currency movements, and geopolitical tensions, which have impacted customer demand. Despite this, the company remains confident in long-term secular growth trends in its markets and continues to invest in R&D for next-generation technologies such as 5G/6G, AI, high-speed networks, and automotive. The company also announced its intention to acquire Spirent Communications PLC, demonstrating a continued focus on strategic growth, both organically and through acquisitions.

For the nine months ended July 31, 2024, Keysight generated $693 million in net cash from operating activities, a decrease from $1.030 billion in the same period last year. This reduction was primarily due to lower net income and changes in working capital, although a $165 million discrete tax benefit related to intangible asset amortization and a $61 million benefit from a Malaysia tax settlement contributed positively. Investing activities used $781 million, significantly impacted by acquisition spending, and financing activities used $753 million.