01—Abstract
Summary
Summary of the 10-Q filed August 29, 2024. Cited figures are marked; the original filing is the authoritative source.
Keysight Technologies, Inc. reported a revenue of $1.217 billiona 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 millionb, 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 millionc 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 billiond 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.
02—Key points
Key Highlights
- Total revenue for Q3 FY24 decreased 12% year-over-year to $1.217 billion.
- Net 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.
- For 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).
- The company made significant acquisitions, including ESI Group, Riscure Holding B.V., and AnaPico AG, leading to a substantial increase in goodwill and intangible assets.
- Operating margin for Q3 FY24 compressed to 16.8% from 26.4% in the prior year, reflecting lower revenue and increased operating expenses.
- Cash 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.
- Keysight announced its intention to acquire Spirent Communications PLC for approximately $1.463 billion, signaling continued strategic growth ambitions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Keysight Technologies, Inc. kept $0.32.
- Revenue$1.22B100.0%
- Cost of revenue−$462.0M38.0%
- Gross profit$755.0M62.0%
- Operating costs−$550.0M45.2%
- Operating income$205.0M16.8%
- Interest, other & tax$184.0M15.1%
- Net income$389.0M32.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed August 29, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $1.22B$1.38B | −11.9% |
| Cost of Revenue | $462.00M$486.00M | −4.9% |
| Gross Profit | $755.00M$896.00M | −15.7% |
| R&D Expenses | $226.00M$215.00M | +5.1% |
| SG&A Expenses | $329.00M$319.00M | +3.1% |
| Operating Expenses | $1.01B$1.02B | −0.5% |
| Operating Income | $205.00M$365.00M | −43.8% |
| Net Income | $389.00M$288.00M | +35.1% |
| EPS (Basic) | $2.23$1.62 | +37.7% |
| EPS (Diluted) | $2.22$1.61 | +37.9% |
| Shares Outstanding (Basic) | 174.00M178.00M | −2.2% |
| Shares Outstanding (Diluted) | 175.00M179.00M | −2.2% |
05—Questions
Frequently Asked Questions
What was Keysight's revenue and net income performance in the third quarter of fiscal year 2024?
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.
How did the acquisitions impact Keysight's financial statements?
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.
What is Keysight's outlook and strategic direction given the current macroeconomic environment?
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.
How did the company's cash flow generation perform in the first nine months of fiscal 2024?
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.
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