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Keysight Technologies, Inc. 8-K Report, Financial Results (May 20, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed May 20, 2024
Period End
May 20, 2024
Security
KEYS
In the record · 2016–202610-K1110-Q338-K96

KEYS filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 96 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Apr ’17Apr ’17
  2. Leadership change8-K · May ’22May ’22
  3. Leadership change8-K · Aug ’26Aug ’26

01—Abstract

Summary

Summary of the 8-K filed May 20, 2024. Cited figures are marked; the original filing is the authoritative source.

Keysight Technologies (KEYS) reported fiscal Q2 2024 results (quarter ended April 30, 2024) that came in above the high end of its own guidance, but the top line continued to contract sharply year over year.

Revenue fell 13% to $1.216 billiona from $1.390 billion, with Communications Solutions Group down 10% to $840 million and Electronic Industrial Solutions Group down 17% to $376 million. Orders were $1.219 billion versus $1.319 billion a year earlier, a book-to-bill slightly below 1.0, which signals that demand has not yet recovered. Management described customer spending as constrained but noted pockets of growth and stability across several end markets.

Profitability and cash generation weakened materially. GAAP net income fell to $126 millionb ($0.72 diluted EPS) from $283 million ($1.58), and non-GAAP net income fell to $247 million ($1.41 per share) from $380 million ($2.12). Operating cash flow dropped to $110 million from $423 million, and free cash flow fell to $74 million from $370 million.

Segment operating margins compressed, with EISG's falling from 35% to 19%. Six-month cash flow from operations was $438 millionc versus $789 million. Cash and equivalents declined to $1.66 billion from $2.47 billion at fiscal year-end, largely because of a $458 million acquisition of non-controlling interests and $556 million in acquisitions, while goodwill and intangibles rose sharply.

For the third fiscal quarter of 2024, Keysight guided revenue to $1.18d–$1.20 billion and non-GAAP EPS to $1.30–$1.36 on about 175 million diluted shares. The full-year outlook was left unchanged, and management assumed only modest order growth in the second half. Investors will want to watch whether orders stabilize and whether margins recover, since the guidance implies continued year-over-year revenue pressure and the balance sheet has been used for acquisitions and buybacks rather than organic cash build.

02—Key points

Key Highlights

  1. Q2 FY24 revenue of $1.216B was down 13% year over year from $1.390B, but ahead of the high end of management's guidance.
  2. Orders of $1.219B versus $1.319B a year earlier indicate book-to-bill slightly below 1.0 and no clear demand recovery yet.
  3. GAAP diluted EPS was $0.72 versus $1.58; non-GAAP EPS was $1.41 versus $2.12, reflecting lower operating income (GAAP operating income $177M vs. $354M).
  4. Free cash flow collapsed to $74M from $370M in the prior-year quarter, and six-month operating cash flow fell to $438M from $789M.
  5. EISG revenue fell 17% and its operating margin dropped from 35% to 19%; CSG revenue fell 10% with operating margin of 27%.
  6. Q3 FY24 guidance calls for revenue of $1.18–$1.20B and non-GAAP EPS of $1.30–$1.36; full-year outlook unchanged, assuming modest second-half order growth.
  7. Cash fell to $1.66B from $2.47B at October 2023, driven by a $458M purchase of non-controlling interests and $556M in acquisitions; goodwill rose to $2.28B.

03—Questions

Frequently Asked Questions

  1. Did Keysight beat its own guidance for the quarter?

    Yes. Management said Q2 revenue and results came in above the high end of its guidance. The beat was against lowered internal expectations, though, and revenue still declined 13% year over year.

  2. Why did earnings and cash flow decline so sharply?

    Revenue fell 13% and operating income dropped to $177M from $354M. Operating cash flow fell to $110M from $423M, and free cash flow fell to $74M from $370M, reflecting lower volumes, weaker EISG margins, higher SG&A, and working capital effects.

  3. What does the Q3 guidance and unchanged full-year outlook imply?

    Q3 revenue guidance of $1.18–$1.20B and non-GAAP EPS of $1.30–$1.36 implies continued year-over-year declines, given the prior-year quarter's higher revenue. Keeping the full-year outlook unchanged while assuming only modest second-half order growth signals management expects gradual rather than rapid recovery.

  4. What drove the cash decline and balance sheet changes?

    Cash fell to $1.66B from $2.47B at fiscal year-end. Major uses were $458M to acquire non-controlling interests, $556M for acquisitions (which raised goodwill and intangibles), $139M of share repurchases, and $83M of capital expenditures. Total debt remained about $1.8B.

  5. Which segments are driving the weakness?

    Electronic Industrial Solutions Group is the weaker segment, with revenue down 17% on constrained semiconductor and manufacturing spending and its operating margin falling to 19%. Communications Solutions Group declined 10%, with commercial communications down 10% and aerospace, defense and government down 11%, but kept a 27% operating margin.

04—Continue

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