Achieved Record Full Year Revenue, Gross
Margin, and Operating Margin
Keysight Technologies, Inc. (NYSE: KEYS) today reported
financial results for the fourth fiscal quarter and fiscal year
ended October 31, 2023.
“Keysight delivered solid fourth quarter results and finished
the year with record revenue, gross margin, and operating margin,”
said Satish Dhanasekaran, Keysight’s President and CEO. “In what
remains a challenging macro environment, our strategic customer
engagement is high, and we are continuing to capitalize on
opportunities across a broad and diverse set of end markets,
positioning us well for an eventual recovery.”
Fourth Quarter Financial Summary
- Revenue was $1.31 billion, compared with $1.44 billion last
year.
- GAAP net income was $226 million, or $1.28 per share, compared
with $299 million, or $1.66 per share, in the fourth quarter of
2022.
- Non-GAAP net income was $352 million, or $1.99 per share,
compared with $386 million, or $2.14 per share in the fourth
quarter of 2022.
- Cash flow from operations was $378 million, compared with $398
million last year. Free cash flow was $340 million, compared with
$340 million in the fourth quarter of 2022.
- As of October 31, 2023, cash and cash equivalents totaled $2.47
billion.
Fiscal Year 2023 Financial Summary
- Revenue was $5.46 billion, compared with $5.42 billion last
year.
- GAAP net income was $1.06 billion, or $5.91 per share, compared
with $1.12 billion, or $6.18 per share in fiscal 2022.
- Non-GAAP net income was $1.49 billion, or $8.33 per share,
compared with $1.39 billion, or $7.63 per share in fiscal year
2022.
- Cash flow from operations was $1.41 billion, compared with
$1.14 billion last year. Free cash flow was $1.21 billion, compared
with $0.96 billion in fiscal year 2022.
Reporting Segments
- Communications Solutions Group (CSG)
CSG reported revenue of $891 million in the
fourth quarter, down 10 percent over last year, reflecting a 17
percent decline in commercial communications, while aerospace,
defense, and government increased 4 percent driven by investments
in defense technology modernization, electromagnetic spectrum
operations, radar, and space and satellite.
- Electronic Industrial Solutions Group (EISG)
EISG reported revenue of $420 million in the
fourth quarter, down 7 percent over last year, reflecting
contraction in semiconductor and manufacturing-related customer
spending, while investment in new mobility automotive, advanced
research, and digital health held steady.
Outlook
Keysight’s first fiscal quarter of 2024 revenue is expected to
be in the range of $1.235 billion to $1.255 billion. Non-GAAP
earnings per share for the first fiscal quarter of 2024 are
expected to be in the range of $1.53 to $1.59. Certain items
impacting the GAAP tax rate pertain to future events and are not
currently estimable with a reasonable degree of accuracy;
therefore, no reconciliation of GAAP earnings per share to non-GAAP
has been provided. Further information is discussed in the section
titled “Use of Non-GAAP Financial Measures” below.
Webcast
Keysight’s management will present more details about its fourth
quarter and fiscal year 2023 financial results and its first
quarter FY2024 outlook on a conference call with investors today at
1:30 p.m. PT. This event will be webcast in listen-only mode.
Listeners may log on to the call at www.investor.keysight.com under
the “Upcoming Events” section and select “Q4 2023 Keysight
Technologies Inc. Earnings Conference Call” to participate or dial
+1 833-470-1428 (Toll-Free) or +1 646-904-5544 (Local) and enter
passcode 581293. The webcast will remain on the company site for 90
days.
Forward-Looking Statements
This communication contains forward-looking statements as
defined in the Securities Exchange Act of 1934 and is subject to
the safe harbors created therein. The words “expect,” “intend,”
“will,” “should,” and similar expressions, as they relate to the
company, are intended to identify forward-looking statements. These
forward-looking statements involve risks and uncertainties that
could significantly affect the expected results and are based on
certain key assumptions of Keysight’s management and on currently
available information. Due to such uncertainties and risks, no
assurances can be given that such expectations or assumptions will
prove to have been correct, and readers are cautioned not to place
undue reliance on such forward-looking statements, which speak only
as of the date hereof. Keysight undertakes no responsibility to
publicly update or revise any forward-looking statement. The
forward-looking statements contained herein include, but are not
limited to, predictions, future guidance, projections, beliefs, and
expectations about the company’s goals, revenues, financial
condition, earnings, and operations that involve risks and
uncertainties that could cause Keysight’s results to differ
materially from management’s current expectations. Such risks and
uncertainties include, but are not limited to, impacts of inflation
and a mixed demand environment; impacts of geopolitical tension and
conflict; export control regulations and compliance; net zero
emissions commitments; our ability to retain key personnel; our
ability to successfully integrate key acquisitions; changes in the
demand for current and new products, technologies, and services;
customer purchasing decisions and timing; and order
cancellations.
In addition to the risks above, other risks that Keysight faces
include those detailed in Keysight’s filings with the Securities
and Exchange Commission on Keysight’s yearly report on Form 10-K
for the period ended October 31, 2022, and Keysight’s quarterly
report on Form 10-Q for the period ended July 31, 2023.
Segment Data
Segment data reflects the results of our reportable segments
under our management reporting system. Segment data are provided on
page 6 of the attached tables.
Use of Non-GAAP Financial Measures
In addition to financial information prepared in accordance with
U.S. GAAP (“GAAP”), this document also contains certain non-GAAP
financial measures based on management’s view of performance,
including:
- Non-GAAP Net Income/Earnings
- Non-GAAP Net Income per share/Earnings per share
- Free Cash Flow
Income per share is based on weighted average diluted share
count. See the attached supplemental schedules for reconciliations
of each non-GAAP financial measure to its most directly comparable
GAAP financial measure for the three months ended October 31, 2023
and fiscal year 2023. Following the reconciliations is a discussion
of the items adjusted from our non-GAAP financial measures and the
company’s reasons for including or excluding certain categories of
income or expenses from our non-GAAP results.
About Keysight Technologies
At Keysight (NYSE: KEYS), we inspire and empower innovators to
bring world-changing technologies to life. As an S&P 500
company, we're delivering market-leading design, emulation, and
test solutions to help engineers develop and deploy faster, with
less risk, throughout the entire product lifecycle. We're a global
innovation partner enabling customers in communications, industrial
automation, aerospace and defense, automotive, semiconductor, and
general electronics markets to accelerate innovation to connect and
secure the world. Learn more at Keysight Newsroom and
www.keysight.com.
Source: IR-KEYS
KEYSIGHT TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
PRELIMINARY
Three months ended
October 31,
Percent
2023
2022
Inc/(Dec)
Orders
$
1,327
$
1,570
(16)%
Revenue
$
1,311
$
1,443
(9)%
Costs and expenses:
Cost of products and services
467
533
(12)%
Research and development
218
215
1%
Selling, general and administrative
313
321
(2)%
Other operating expense (income), net
(4
)
(5
)
(27)%
Total costs and expenses
994
1,064
(7)%
Income from operations
317
379
(16)%
Interest income
32
10
194%
Interest expense
(20
)
(20
)
—
Other income (expense), net
(53
)
(1
)
1510%
Income before taxes
276
368
(25)%
Provision for income taxes
50
69
(27)%
Net income
$
226
$
299
(24)%
Net income per share:
Basic
$
1.28
$
1.67
Diluted
$
1.28
$
1.66
Weighted average shares used in computing net income per share:
Basic
176
179
Diluted
177
180
Page 1
KEYSIGHT TECHNOLOGIES,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In millions, except per share
data)
(Unaudited)
PRELIMINARY
Year ended
October 31,
Percent
2023
2022
Inc/(Dec)
Orders
$
5,190
$
5,984
(13)%
Revenue
$
5,464
$
5,420
1%
Costs and expenses:
Cost of products and services
1,932
1,970
(2)%
Research and development
882
841
5%
Selling, general and administrative
1,307
1,283
2%
Other operating expense (income), net
(15
)
(8
)
80%
Total costs and expenses
4,106
4,086
1%
Income from operations
1,358
1,334
2%
Interest income
102
16
518%
Interest expense
(78
)
(79
)
(1)%
Other income (expense), net
(25
)
14
—
Income before taxes
1,357
1,285
6%
Provision for income taxes
300
161
87%
Net income
$
1,057
$
1,124
(6)%
Net income per share:
Basic
$
5.95
$
6.23
Diluted
$
5.91
$
6.18
Weighted average shares used in computing net income per share:
Basic
178
180
Diluted
179
182
Page 2
KEYSIGHT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED
BALANCE SHEET (In millions, except par value and share
data) (Unaudited) PRELIMINARY October
31, October 31,
2023
2022
ASSETS Current assets: Cash and cash
equivalents
$
2,472
$
2,042
Accounts receivable, net
900
905
Inventory
985
858
Other current assets
452
429
Total current assets
4,809
4,234
Property, plant and equipment, net
761
690
Operating lease right-of-use assets
226
220
Goodwill
1,640
1,582
Other intangible assets, net
155
189
Long-term investments
81
62
Long-term deferred tax assets
671
667
Other assets
340
454
Total assets
$
8,683
$
8,098
LIABILITIES AND EQUITY Current liabilities:
Current portion of long-term debt
$
599
$
—
Accounts payable
286
348
Employee compensation and benefits
304
333
Deferred revenue
541
495
Income and other taxes payable
90
96
Operating lease liabilities
40
39
Other accrued liabilities
189
96
Total current liabilities
2,049
1,407
Long-term debt
1,195
1,793
Retirement and post-retirement benefits
64
58
Long-term deferred revenue
216
197
Long-term operating lease liabilities
192
186
Other long-term liabilities
313
296
Total liabilities
4,029
3,937
Stockholders' equity: Preferred stock; $0.01 par value; 100
million shares authorized; none issued and outstanding
—
—
Common stock; $0.01 par value; 1 billion shares authorized; issued
and outstanding shares: 200 million and 199 million, respectively
2
2
Treasury stock, at cost; 25.4 million shares and 20.5 million
shares, respectively
(2,980
)
(2,274
)
Additional paid-in-capital
2,487
2,333
Retained earnings
5,611
4,554
Accumulated other comprehensive loss
(466
)
(454
)
Total stockholders' equity
4,654
4,161
Total liabilities and equity
$
8,683
$
8,098
Page 3
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In
millions) (Unaudited) PRELIMINARY Year
ended October 31,
2023
2022
Cash flows from operating activities: Net income
$
1,057
$
1,124
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation
120
117
Amortization
92
106
Share-based compensation
135
125
Deferred tax expense (benefit)
(3
)
7
Excess and obsolete inventory-related charges
27
27
Unrealized loss (gain) on investments in equity securities
(5
)
31
Other non-cash expenses (income), net
4
11
Changes in assets and liabilities, net of effects of businesses
acquired: Accounts receivable
14
(204
)
Inventory
(148
)
(125
)
Accounts payable
(62
)
56
Employee compensation and benefits
(43
)
(17
)
Deferred revenue
61
79
Income taxes payable
(40
)
(14
)
Retirement and post-retirement benefits
(8
)
(19
)
Interest rate swap agreement termination proceeds
107
—
Prepaid assets
7
(124
)
Other assets and liabilities
93
(36
)
Net cash provided by operating activities(a)
1,408
1,144
Cash flows from investing activities: Investments in
property, plant and equipment
(196
)
(185
)
Acquisitions of businesses and intangible assets, net of cash
acquired
(85
)
(33
)
Purchase of investments
(7
)
(33
)
Net cash used in investing activities
(288
)
(251
)
Cash flows from financing activities: Proceeds from issuance
of common stock under employee stock plans
67
63
Payment of taxes related to net share settlement of equity awards
(49
)
(74
)
Treasury stock repurchases
(702
)
(849
)
Other financing activities
(3
)
(1
)
Net cash used in financing activities
(687
)
(861
)
Effect of exchange rate movements
(2
)
(43
)
Net increase (decrease) in cash, cash equivalents, and
restricted cash
431
(11
)
Cash, cash equivalents, and restricted cash at beginning of year
2,057
2,068
Cash, cash equivalents, and restricted cash at end of year
$
2,488
$
2,057
(a) Cash payments included in operating activities:
Interest payments
$
75
$
75
Income tax paid, net
$
343
$
191
Page 4
KEYSIGHT TECHNOLOGIES, INC. REVENUE
BY END MARKETS (In millions) (Unaudited)
PRELIMINARY Percent Percent
Q4'23 Q4'22 Inc/(Dec) FY23 FY22
Inc/(Dec) Aerospace, Defense and Government
$
323
$
311
4%
$
1,250
$
1,171
7%
Commercial Communications
568
681
(17)%
2,435
2,632
(7)%
Electronic Industrial
420
451
(7)%
1,779
1,617
10%
Total Revenue
$
1,311
$
1,443
(9)%
$
5,464
$
5,420
1%
Page 5
KEYSIGHT TECHNOLOGIES, INC. SEGMENT
RESULTS INFORMATION (In millions, except where noted)
(Unaudited) PRELIMINARY Communications
Solutions Group Percent Q4'23 Q4'22
Inc/(Dec) Revenue
$
891
$
992
(10)%
Gross margin, %
68
%
66
%
Income from operations
$
257
$
289
Operating margin, %
29
%
29
%
Electronic Industrial Solutions Group
Percent Q4'23 Q4'22 Inc/(Dec) Revenue
$
420
$
451
(7)%
Gross margin, %
61
%
60
%
Income from operations
$
127
$
142
Operating margin, %
30
%
32
%
Segment revenue and income from operations are
consistent with the respective non-GAAP financial measures as
discussed on last page. Page 6
KEYSIGHT
TECHNOLOGIES, INC. NET INCOME AND DILUTED EPS
RECONCILIATION (In millions, except per share data)
(Unaudited) PRELIMINARY Three months
ended Year ended October 31, October 31,
2023
2022
2023
2022
NetIncome DilutedEPS NetIncome
DilutedEPS NetIncome DilutedEPS
NetIncome DilutedEPS Net income, as reported
226
$
1.28
$
299
$
1.66
$
1,057
$
5.91
$
1,124
$
6.18
Non-GAAP adjustments: Amortization of acquisition-related balances
19
0.11
25
0.14
90
0.50
103
0.57
Share-based compensation
25
0.14
23
0.13
136
0.76
126
0.69
Acquisition and integration costs
48
0.27
2
0.01
60
0.34
9
0.05
Restructuring and others
32
0.18
20
0.12
48
0.27
54
0.30
Adjustment for taxes(a)
2
0.01
17
0.08
97
0.55
(28
)
(0.16
)
Non-GAAP Net income
352
$
1.99
$
386
$
2.14
$
1,488
$
8.33
$
1,388
$
7.63
Weighted average shares outstanding - diluted
177
180
179
182
(a) For both the three and twelve months ended
October 31, 2023 and 2022, management uses a non-GAAP effective tax
rate of 12%. Please refer to last page for details on the
use of non-GAAP financial measures. Page 7
KEYSIGHT TECHNOLOGIES, INC. FREE CASH FLOW (In
millions) (Unaudited) PRELIMINARY Three
months ended Year ended October 31, October
31,
2023
2022
2023
2022
Net cash provided by operating activities
$
378
$
398
$
1,408
$
1,144
Less: Investments in property, plant and equipment
(38
)
(58
)
(196
)
(185
)
Free cash flow
$
340
$
340
$
1,212
$
959
Please refer to last page for details on the use of
non-GAAP financial measures. Page 8
Non-GAAP
Financial Measures Management uses both GAAP and
non-GAAP financial measures to analyze and assess the overall
performance of the business, to make operating decisions and to
forecast and plan for future periods. We believe that our investors
benefit from seeing our results “through the eyes of management” in
addition to seeing our GAAP results. This information enhances
investors’ understanding of the continuing performance of our
business and facilitates comparison of performance to our
historical and future periods. Our non-GAAP financial
measures may not be comparable to similarly titled measures used by
other companies, including industry peer companies, limiting the
usefulness of these measures for comparative purposes. These
non-GAAP measures should be considered supplemental to and not a
substitute for financial information prepared in accordance with
GAAP. The discussion below presents information about each of the
non-GAAP financial measures and the company’s reasons for including
or excluding certain categories of income or expenses from our
non-GAAP results. In future periods, we may exclude such items and
may incur income and expenses similar to these excluded items.
Accordingly, adjustments for these items and other similar items in
our non-GAAP presentation should not be interpreted as implying
that these items are non-recurring, infrequent or unusual.
Non-GAAP Revenue generally relates to an acquisition and includes
recognition of acquired deferred revenue that was written down to
fair value in purchase accounting. Management believes that
excluding fair value purchase accounting adjustments more closely
correlates with the ordinary and ongoing course of the acquired
company’s operations and facilitates analysis of revenue growth and
business trends. We may not have non-GAAP revenue in all periods.
Core Revenue is GAAP/non-GAAP revenue (as applicable)
excluding the impact of foreign currency changes and revenue
associated with material acquisitions or divestitures completed
within the last twelve months. We exclude the impact of foreign
currency changes as currency rates can fluctuate based on factors
that are not within our control and can obscure revenue growth
trends. As the nature, size and number of acquisitions can vary
significantly from period to period and as compared to our peers,
we exclude revenue associated with recently acquired businesses to
facilitate comparisons of revenue growth and analysis of underlying
business trends. Free cash flow includes net cash provided
by operating activities adjusted for investments in property, plant
& equipment. Non-GAAP Income from Operations, Non-GAAP
Net Income and Non-GAAP Diluted EPS may include the following types
of adjustments:
•
Acquisition-related Items: We exclude the impact of certain items
recorded in connection with business combinations from our non-GAAP
financial measures that are either non-cash or not normal,
recurring operating expenses due to their nature, variability of
amounts and lack of predictability as to occurrence or timing.
These amounts may include non-cash items such as the amortization
of acquired intangible assets and amortization of items associated
with fair value purchase accounting adjustments, including
recognition of acquired deferred revenue (see Non-GAAP Revenue
above). We also exclude other acquisition and integration costs
associated with business acquisitions that are not normal recurring
operating expenses, including amortization of amounts paid to
redeem acquirees’ unvested stock-based compensation awards, and
legal, accounting and due diligence costs. We exclude these charges
to facilitate a more meaningful evaluation of our current operating
performance and comparisons to our past operating performance.
•
Share-based Compensation Expense: We exclude share-based
compensation expense from our non-GAAP financial measures because
share-based compensation expense can vary significantly from period
to period based on the company’s share price, as well as the
timing, size and nature of equity awards granted. Management
believes the exclusion of this expense facilitates the ability of
investors to compare the company’s operating results with those of
other companies, many of which also exclude share-based
compensation expense in determining their non-GAAP financial
measures.
•
Restructuring and others: We exclude
incremental expenses associated with restructuring initiatives,
usually aimed at material changes in the business or cost
structure. Such costs may include employee separation costs, asset
impairments, facility-related costs, contract termination fees, and
costs to move operations from one location to another. These
activities can vary significantly from period to period based on
the timing, size and nature of restructuring plans; therefore, we
do not consider such costs to be normal, recurring operating
expenses.
We also exclude “others”, not normal,
recurring, cash operating income/expenses from our non-GAAP
financial measures. Such items are evaluated on an individual
basis, based on both quantitative and qualitative factors and
generally represent items that we do not anticipate occurring as
part of our normal business. While not all-inclusive, examples of
such items would include net unrealized gains on equity investments
still held, significant non-recurring events like realized gains or
losses associated with our employee benefit plans, costs and
recoveries related to unusual events, gain on sale of
assets/divestitures, etc. We believe that these costs do not
reflect expected future operating expenses and do not contribute to
a meaningful evaluation of the company’s current operating
performance or comparisons to our operating performance in other
periods.
•
Estimated Tax Rate: We utilize a consistent methodology for
long-term projected non-GAAP tax rate. When projecting this
long-term rate, we exclude any tax benefits or expenses that are
not directly related to ongoing operations and which are either
isolated or cannot be expected to occur again with any regularity
or predictability. Additionally, we evaluate our current long-term
projections, current tax structure and other factors, such as
existing tax positions in various jurisdictions and key tax
holidays in major jurisdictions where Keysight operates. This tax
rate could change in the future for a variety of reasons, including
but not limited to significant changes in geographic earnings mix
including acquisition activity, or fundamental tax law changes in
major jurisdictions where Keysight operates. The above reasons also
limit our ability to reasonably estimate the future GAAP tax rate
and provide a reconciliation of the expected non-GAAP earnings per
share for the first quarter of fiscal 2024 to the GAAP equivalent.
Management recognizes these items can have a material impact
on our cash flows and/or our net income. Our GAAP financial
statements, including our Condensed Consolidated Statement of Cash
Flows, portray those effects. Although we believe it is useful for
investors to see core performance free of special items, investors
should understand that the excluded costs are actual expenses that
may impact the cash available to us for other uses. To gain a
complete picture of all effects on the company’s profit and loss
from any and all events, management does (and investors should)
rely upon the Condensed Consolidated Statement of Operations
prepared in accordance with GAAP. The non-GAAP measures focus
instead upon the core business of the company, which is only a
subset, albeit a critical one, of the company’s performance.
Page 9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231120298027/en/
INVESTOR CONTACT Jason Kary +1 707 577 6916
jason.kary@keysight.com
MEDIA CONTACT Andrea Mueller +1 408 218 4754
andrea.mueller@keysight.com
Keysight Technologies (NYSE:KEYS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Keysight Technologies (NYSE:KEYS)
Historical Stock Chart
From Jul 2023 to Jul 2024