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21-05-2025
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Q2 2025 Keysight Technologies Inc Earnings Call
Paulenier Sims; Director, Investor Relations; Keysight Technologies Inc Satish Dhanasekaran; President, Chief Executive Officer, Director; Keysight Technologies Inc Neil Dougherty; Chief Financial Officer, Executive Vice President; Keysight Technologies Inc Tim Long; Analyst; Barclays Matt Niknam; Analyst; Deutsche Bank Mark Delaney; Analyst; Goldman Sachs Meta Marshall; Analyst; Morgan Stanley Aaron Rakers; Analyst; Wells Fargo Securities, LLC Robert Jamieson; Analyst; Vertical Research Partners Robert Mason; Senior Research Analyst; Robert W. Baird & Co Inc Adam Thalhimer; Analyst; Thompson, Davis & Company Samik Chatterjee; Analyst; JPMorgan Mehdi Hosseini; Analyst; Susquehanna Financial Group LLLP Operator Good day, ladies and gentlemen, and welcome to Keysight Technologies fiscal second-quarter 2025 earnings conference call. My name is [Tamia], and I will be your lead operator today. (Operator Instructions) This call is being recorded today, Tuesday, May 20, 2025, at 1:30 PM Pacific Time.I would like to hand the call over to Paulenier Sims, Director of Investor Relations. Please go ahead, Ms. Sims. Paulenier Sims Thank you and welcome, everyone, to Keysight's second-quarter earnings conference call for fiscal year 2025. Joining me are Keysight's President and CEO, Satish Dhanasekaran; and our CFO, Neil press release and information to supplement today's discussion are on our website at under financial information and quarterly reports. Today's comments will refer to non-GAAP financial measures. We will also make reference to core growth, which excludes the impact of currency movements and acquisitions or divestitures completed over the last 12 months. The most directly comparable GAAP financial metrics and reconciliations are on our website, and all comparisons are on a year-over-year basis unless otherwise will make forward-looking statements about the financial performance of the company on today's call. These statements are subject to risks and uncertainties and are only valid as of today. We assume no obligation to update them and encourage you to review our recent SEC filings for a more complete view of these risks and other factors. Lastly, management is scheduled to participate in an upcoming Investor Conference hosted by now I will turn the call over to Satish. Satish Dhanasekaran Good afternoon, everyone, and thank you for joining us the second quarter, Keysight delivered revenue of $1.3 billion and earnings per share of $1.70 both of which exceeded the high end of our guidance. This marks the second consecutive quarter of revenue growth driven by continued momentum in CSG and return to growth in EISG. The demand environment was solid in the quarter, with orders growing 8% year over year and 4% sequentially to $1.3 billion. Even as we are monitoring the overall macro environment, we entered the second half with a healthy pipeline of opportunity and strong customer engagements. Neil will have more details on the tariff impact in his our business results demonstrate the resilience of our business and the durability of our financial operating model, which is underpinned by a flexible cost structure, supply chain, and operating capabilities that allow us to quickly adapt to external dynamics. As a result of a multi-year investments, we have a diversified global supply chain which is largely based in Southeast Asia with minimal exposure in the near-term uncertainty, we're confident in our market leadership, the strength of our operating model, and our ability to generate value for our stakeholders. Our capital allocation priorities have not changed. We are investing for the long term while also pursuing a balanced return of capital enabled by a strong free cash flow conversion. Over the past 12 quarters, we've returned over $1.7 billion or roughly 50% of free cash flow to investors via to business segments. In CSG, Commercial Communications orders grew double digits. Demand remains robust in wireline where the ongoing data center infrastructure expansion is driving all the strength. We saw continued deployment of 400 and 800 gig Ethernet technologies in AI data center applications. R&D investments in 1.6 terabyte electrical and optical technologies, as well as expansion of new protocols in AI data center networks are fueling demand as the entire industry is innovating and developing new applications and quarter at OFFC, we demonstrated the industry's first solution for 448 gig per lane optical transmission, a key building block in the deployment of 1.6 and 3.2 terabit networks. The depth and breadth of Keysight's capabilities in the electrical and optical and wireline protocol stacks positions as well to enable ongoing innovation in high-performance computing, memory, and orders grew in Q2. We saw a steady pace of R&D activity related to 5G advanced and early 6G research, as well as investments in non-terrestrial networks. While smartphone supply chain activity remains stable, innovation and investment in R&D in radio access networks continue to grow. Keysight's new digital twin and system emulation capabilities are enabling non-terrestrial applications and expanding our customer Aerospace, Defense & Government, orders grew this quarter driven by strength in the US and Europe. Ongoing investment in spectrum operations and space applications drove growth. Although the US will be operating under a continuing resolution for most of the year, overall demand and pipeline of opportunities remains robust with prime contractor backlogs at record levels. Investments in defense modernization remains a top priority for many countries as reflected in the increased budget proposals in the US, Europe, and is a trusted partner in this ecosystem delivering advanced, high-fidelity test capabilities that simulate real-world electronic threats in lab environments. This quarter, Keysight won a notable deal with a major defense agency in Europe to modernize its testing capabilities for antenna radar applications which are key to mission-critical applications. Our innovation pipeline is driving a steady cadence of new products and solutions which this quarter included a higher-frequency extensions to our phase noise analyzer for defense applications and a new digital communications analyzer for 24 gig transceiver test enabling wireline and general-purpose-use to Electronic Industrial Solutions Group, the demand environment remains mixed while the revenue returned to growth after six quarters of decline. In semi, the demand for our wafer test solutions from large foundry and IDM customers remains strong. Leading-edge process node investment was augmented by rapid growth in high-bandwidth applications. Customer engagements for silicon photonics, co-packaged optics accelerated within the quarter as the industry works to address performance limitations across latency, bandwidth, and power in the AI data automotive, while orders and revenues were down, the business has largely stabilized. Engagements with OEM customers remained steady with investments in software-defined vehicle capabilities, including cybersecurity, radar scene emulation, and Ada chipset development. This quarter we secured a key win with a major automotive OEM for design and test of their home energy management systems. General electronics orders grew for the third consecutive quarter, although at a lower rate. Growth in multi-industrial and medtech customers for both R&D and manufacturing solutions was partially offset by contraction in US education funding and continued normalization in the distribution to software. Design engineering software orders grew double digits reflecting a healthy demand for our RFEDA solutions. We're seeing growing interest from industrial customers looking to apply simulation and virtual prototyping in the mechanical domain. With respect to our recent ESI acquisition, we're enabling next-generation industrial design by delivering a panel forming solution to a large European auto OEM that will drive efficiencies through their manufacturing processes and optimize their production closing, we're pleased with the recovery that's underway. Our end markets have largely performed in line with our expectations heading into this year, and I'm once again proud of the Keysight team's execution in this quarter in what remains a dynamic environment. Keysight's broad portfolio of differentiated solutions positions the company to outperform in a variety of market environments. We continue to make deliberate multi-year investments aligned with long-term technology trends, creating opportunities now and into the future. As we move through the second half, we remain focused on executing on what we control and continuing to deliver value to our customers and that, I'll turn it over to Neil to discuss our financial performance and outlook. Neil Dougherty Thank you, Satish, and hello, everyone. Second-quarter revenue of $1.306 billion was above the high end of our guidance range of 7% on a reported basis and 8% on a core basis. Orders of $1.316 billion were up 8% on both the reported and core basis. Looking at our operational results for Q2, we reported gross margin of 65%. Operating expenses were $516 million up 4%. Q2 operating margin was 25% and increased 100 basis points over last to earnings, we achieved $295 million of net income and delivered earnings per share of $1.70. Our weighted average share account for the quarter was 173 million shares. Our Q2 results included approximately $7 million of new tariff expenses in cost of sales, which had a 60 basis point unfavorable impact on both gross and operating margins and resulted in an approximately $0.04 reduction in earnings per to the performance of our segments, the Communications Solutions Group generated second-quarter revenue of $913 million, up 9% on a reported and core basis. Commercial Communications revenue of $612 million was up 9%, reflecting sustained strength in wireline and growth and wireless. Aerospace, Defense & Government achieved revenue of $301 million, an increase of 9%. Altogether, CST delivered 67% gross margin and 26% operating Electronic Industrial Solutions Group generated $393 million in revenue, an increase of 5%, with growth in semiconductor and general electronics more than offsetting a decline in automotive and energy. EISG delivered 59% gross margin and 23% operating margin. Software and services accounted for approximately 36% of Keysight revenue while annual recurring revenue was 28% of total to the balance sheet and cash flow, we ended the quarter with $3.118 billion in cash and cash equivalents, generating cash flow from operations of $484 million and free cash flow of $457 million. In April, we issued senior notes for an aggregate principal amount of $750 million. We intend to use the net proceeds for general corporate purposes, which may include partially funding the previously announced acquisition of regard to pending acquisitions, the UK Competition and Markets Authority cleared the Spirent transaction in March. We are progressing through the review process with other regulatory agencies and expect the transaction to close in Keysight's third fiscal quarter. In addition, the acquisition of Optical Solutions Group and PowerArtist is anticipated to close shortly after the Synopsys to Ansys transaction is completed. Lastly, we were repurchased 1,042,000 shares this quarter at an average price of approximately $144 for a total consideration of $150 turning to the current environment, tariffs, and our outlook. We have a diversified global supply chain with minimal exposure to China and have already taken action across multiple factors to reduce the incremental impact of tariffs. Our multi-pronged mitigation approach spans our global manufacturing footprint and sourcing strategies, as well as pricing and cost on actions taken to date, we estimate our annual exposure at approximately $75 to $100 million. We are working to further reduce this exposure and offset any remaining impact. Given the high priority that we place on maintaining our long-term customer relationships, our pricing actions were not applied to pre-tariff backlog. As a result, and assuming tariff rates remain at the current levels, the most significant tariff impact is expected in Q3 with full mitigation by the end of the fiscal currently has $2.4 billion in backlog and enters Q3 with a solid scheduled shipment position despite the dynamics and uncertainty of the current macroeconomic environment. As Satish mentioned earlier, at this point we have not seen any material adverse effects on demand from tariffs and are therefore raising our full-year growth now expect FY25 revenue growth at the midpoint of our 5% to 7% long-term target. And annual EPS growth slightly above our long term 10% target. For the third quarter, we expect revenue in the range of $1.305 billion to $1.325 billion and Q3 earnings per share in the range of $1.63 to $1.69 based on a weighted diluted share count of approximately 173 million shares. Implied in this guidance is the assumption that tariffs remain at current levels for the that, I will turn it back to Paulenier for the Q&A. Paulenier Sims Thank you, Neil. Operator, will you please have the instructions for the Q&A please? Operator (Operator Instructions)Tim Long, Barclays. Satish Dhanasekaran Hi, Tim. Tim Long Hi. Maybe one and then a follow up. Just if we could just go back to AI. I know you guys have been giving us examples each quarter of where you guys are seeing traction it seems like, across the hardware ecosystem and emulation simulation as well. Can you just kind of update us on what kind of new activity you're seeing there and how meaningful it is for the then just on the follow up, if you could just give a little bit more color on the orders and pipeline to get to the full-year guidance. I think normally we do see orders pick up towards the second half of the year. So just curious what you're seeing in pipeline to get confidence in the second half. Thank you. Satish Dhanasekaran Thank you, Tim. Obviously, AI, we view it as a long-term secular trend. And with a clear multi-year roadmap that's forming and a great fit to our strategy of not only being a physical-layer tool provider but also going up the stack with physical and protocol layer and offering more solutions to big mega trends are clear, right? We all know the AI workloads are growing and we're making contributions around on a number of technology fronts, including in memory, compute, networking, with new standards that are forming. So our broad portfolio is really in play as we engage with these customers. And where we see the industry right now is trying to solve a number of the scale-up and scale-out challenges as they deploy this digital infrastructure, right? So that's the action or activity that's being driven. And we had another strong for the first half, last year we said our wireline business was roughly a billion dollars, so over a billion dollars I should say, in sales, and for the first half it grew double digits. So we feel good about our position in this emerging space. And we think it's a long-term growth opportunity for us that we're very regard to the progression of orders and what's baked into our guide, again, look, I think we've said this before that we, despite all the uncertainty and chatter out there and the customers are obviously paying attention to all the tariff talks and all the macro concerns, we have not yet seen any material change in customer behavior with regard to their immediate so as we enter the quarter, we obviously had a strong finish for Q2 which we enter Q3, our pipeline is solid and supports our guide. And we had a pretty strong uptake in pipeline activity as it relates to the second half. So we feel good about the second half. Obviously, there are risks that we're monitoring like everybody else, but we're focused on what we control and feel confident about where we stand today. Tim Long Okay, thank you. Satish Dhanasekaran Thank you. Operator Matt Niknam, Deutsche Bank. Matt Niknam Hey guys, thanks so much for taking the question. One question and then one follow up. I guess first on my main question, you obviously raised the top-line outlook on average by about 100 bps relative to the prior 5%. So I'm curious maybe where you're seeing a little bit of an incrementally improved view relative to three months ago. That's the first just to follow up on cash flow from ops that was meaningfully stronger. I'm just wondering maybe for Neil, anything unique on the working cap side and then maybe how to think about cash flow from ops and working cap over the duration of the fiscal year. Thanks. Satish Dhanasekaran Well, thank you. I think again, as I mentioned before, we looked at the over performance we've had in the first half. We take a look at our pipeline of opportunities we have, the strong backlog position we have, and we then have applied this to essentially raise the topline expectations for the full year. Again, there's a lot of macro risks and other things people are monitoring, but we have not seen any material change in customer if you recall, at the beginning of the year, we said we thought this year would be a slow, gradual recovery in our markets, and we feel like that's exactly the trajectory we're on. So that's where we find ourselves at the end of the first half and feel confident about where we are. But like everybody else, we continue to monitor the (inaudible) due to tariffs and the geopolitical environment. Neil Dougherty Yeah, so the only thing I would add to that, that Satish just said with regard to our outlook for the year, as everybody knows, we tend to see a seasonal uplift in the fourth quarter. We're still expecting the fourth quarter to be our strongest quarter of the year and that that that lends to that guidance it relates to cash flow, yeah, so obviously strong cash flow within the quarter. There are a couple of things in there. So first of all, that did include a little less, about $60 million worth of a gain on a hedging contract associated with the purchase price for Spirent. We had put a contract in place about a year ago set to expire at the end of our first half, which was our original thought on the timing of the close that transaction. So we closed out that transaction and essentially rolled it forward, but when we closed it out, we did recognize about a $60 million gain on that addition, we did see some working capital improvements inventory days were down by about 10%, DSO was down by about 3%, so that contributed to the strong cash flow performance as it significantly lower tax payments than in the year-ago quarter. Operator Mark Delaney, Goldman Sachs. Mark Delaney Yes, good afternoon. Thank you very much for taking my question. I was hoping to better understand the tariff topic. Maybe first one just to level set everyone and including myself. The $75 million to $100 million, is that the gross amount of exposure that you have and the net effect this year is maybe something less than that, or is the $75 million to $100 million what you expect the drag on profits to be for this year? Neil Dougherty Yeah, so $75 million to $100 million is a gross annualized number. Obviously, this thing went into effect in April, so we only have a little less than seven months of total impact. So $75 million to 100 million is the gross number. We are working to offset that, although, as we said in our previous remarks to the extent that we're passing those costs onto made no attempt to reprice backlog and given that we enter Q3 with about $2.4 billion backlog, it's going to take some time for those offsets to materialize. And so relatively little here in Q3, a little bit more in Q4, but by the time we get to Q1, we expect to have those tariff costs fully mitigated. Mark Delaney Helpful, Neil. And that was what my follow up was on. If you're not raising price on backlog, maybe you can help us better understand the mitigating actions that you are taking and your confidence and mitigating the tariffs as you exit the year. Thank you. Neil Dougherty Yeah, so I mean, I think as we think about tariffs, we think of kind of two opportunities. One, what are the actions that we can take to reduce our overall tariff exposure, leveraging our global supply chain, leveraging our manufacturing footprint, taking actions to actually reduce tariff costs, and then once we get to kind of we've optimized the tariff cost side, the question is, what can you do to further mitigate either by passing those costs on via price or surcharges of some sort or a reducing costs elsewhere in your P&L. And so we have actions going on across all of those work when I said we're not raising price on existing backlog, right. So essentially we said, hey, if you had orders that were already on our books that we weren't going to go back and try and recover tariffs on those, but we have taken actions forward-looking on new quotations starting in about mid-April. Satish Dhanasekaran Yeah, Mark, just Satish. To chime in, we have a pretty resilient supply-chain operations that is agile, and we have a considerable amount of operational realignments that we can still work on, because at this point, we're assuming 10% tariff sort of is the base case for us. And should that materially change, we would be prepared to respond to those scenarios as well. Customer pricing and strategies, it's definitely a part of it, but it's also all the other operational alignments that we can make with our partners who we have a multi-year relationship with that can help us scale across geographies if needed. Mark Delaney Thank you very much. I'll pass it on. Satish Dhanasekaran Thank you. Operator (Operator Instructions)Meta Marshall, Morgan Stanley. Meta Marshall Great, thanks. A couple of questions for me. Just one, know that your Aerospace & Defense business is kind of relatively split between kind of US and allies, but just wondering if you had seen any kind of pushback on allied orders that were aligned to US programs or just kind of any commentary you could kind of give on Aerospace & then just also kind of following up on that -- of noted that you said kind of minimal China impact, but just how much of that $75 million to $100 million of impact that you guys are talking about from a gross perspective is from shipping into China versus kind of shipping into the US. Thanks. Satish Dhanasekaran Thank you, Meta. I'll have -- I'll take the Aerospace, Defense and Neil can quantify the China impact.I'll just say that the strong quarter with growth in orders, as I mentioned, even under a continuing resolution that we've been operating under, and this is unprecedented that we're still under continuing resolution maybe for the full year, and so that doesn't limit growth in new programs and such. But we saw some good orders bookings again with our prime contractors in the US and actually had a double-digit order growth in our European to give you some examples, we were awarded by NATO ForEx contract, which is public, to modernize radar and electronic support measures. We also were selected by the US Army for validating Zero Trust security on the unified network. So the spend environment remains strong, especially with the prime contractor this is a business I want to remind you it's always difficult to call on a quarterly basis, but easier to call on a longer term because the trends are clear, and we look at it longer term and say, the US budget next year is likely to go up. European budgets for defense are likely to go up with the programs being put in place. And so -- and we feel good about our portfolio position in Aerospace, Defense. Neil Dougherty Yeah, I mean, and just to get to the question about China. So US, China, China, US, both directions is less than 10% of total tariff exposure. Meta Marshall Okay. Great, thank you. Operator Aaron Rakers, Wells Fargo. Aaron Rakers Yeah, thanks for taking the question. Two if I can, I'll just ask him right away as first, I think Neil, as we talk about the guidance and getting up north of that 5% growth or in that 5% to 7% range that you alluded to, can you just remind us again of how we think about the incremental margin for the company? I think all the way back at the analyst that you talked about anything north of 5% dropping through like a 40% incremental margin and what I'm trying to get to is just the pace of how we could think back to getting off margin back above 30%.And then as a follow up or as the second question I should say is that, can you talk a little bit about the wireless business, that I think previously is talked about is kind of think of that as being stable, but it sounds like that's actually performing a little bit better. How do you think about the durability of that wireless business? Thank you. Neil Dougherty Yeah, so (inaudible) I'll start with the first one here on [yanker] amount. You're absolutely correct. What we've basically said is anytime our business is growing 5% or better that we would expect to drop through that growth at an operating incremental of about 40%. Now I would point out that the tariffs are new and substantial incremental costs that are in the short run going to impact our ability to deliver on that incremental. Aaron Rakers Yes. And on the wireless business? Satish Dhanasekaran Yeah, on the wireless business, again, we're continuing -- I would say the headline is we're continuing to see stability, strengthen the infrastructure side, still the smartphone-related businesses, do some segments of sell soft, especially in China, so still monitoring, but stable, but soft. I would say the real strength is in the network infrastructure side with Open of the latest standards releases with AI and some early 6G research really driving some of the spend and customer engagements. But we have a strong position in the space and we continue to invest for the longer term here to maintain our leadership in the space. Operator Robert Jamieson, Vertical Research. Robert Jamieson Hey, good afternoon. Thanks for taking my questions and nice quarter. Just quickly on software and services, just it's a growing part of the business up to 36% of revenue recurring almost 30% now. Are there any like investments that you're making to further accelerate growth here, just given the margin profile of those businesses. Satish Dhanasekaran Thank you. Again, a big part of our strategy, if you look at the business and how we performed in a downturn, as you rightfully point out, is a function of software and services because it's been such a big part of the company's resilience, especially even as topline comes under some pressure. So we could -- this is clearly the area of focus across all our businesses, we have a strategy to grow the software and one particular area really excited we saw double-digit growth in our simulation business, as an example, it's an area where we have placed a lot of M&A dollars and focus. If you remember, we acquired ESI and now we're also potentially beneficiaries of the Synopsys-Ansys transaction where we might get a couple more acquisitions to bolster our presence in the simulation it does two things, right? It increases our software and recording revenue, but equally it allows us to engage with our customers earlier in the design cycle, which again fits our strategy of being a bigger player in the R&D parts of our market. And now as recovery does happen in our markets, you will see a number, maybe take back as a percentage of the total makes just a little because we're starting to see some of our core business recover. But I think the long term, we still feel like there's more upside to driving the software as a percentage of revenue. Robert Jamieson Sure, thank you. And then, just on AI, I mean, it's been consistent theme and growing nicely, but -- and maybe addressed this earlier, but beyond testing of like the high-speed interconnection network infrastructure. Are there any other kind of test applications or demand that you're seeing from customers within that realm, or is that kind of coming from some of the emulation software they mentioned on testing of how compute latency, et cetera is working its way through the data centers as they are reconfiguring things for higher network speeds and things like that. Satish Dhanasekaran Yeah, I think it's important to characterize this not just a cable test, but it's important to characterize it as the challenges in the digital infrastructure that's being put in place for AI are very different. When customers are trying to look at the scale-up and scale-out challenges they face, what might be an interconnect really turns into a mission-critical fail point if it's not performing right and the cost of failure gets up pretty we're engaging with our customers on those mission-critical needs that they have today, but equally from a strategic sense, we're looking at where is the industry going in five years, and I can tell you that the state of the art on the technology keeps growing. There's this roadmap that's forming around multiple dimensions and we're participating in those to enable it, so we're there for our what we see is a big trend of pulling in the timelines because of the rapid increase in the AI workload, right? So all of this is pretty rich opportunity for us. We also, along the way, have designed wins in the in the software emulation space, which allows customers to isolate at their performance in the AI data center and say, where is the bottleneck to get the true performance. So we're working with them on those as well. So across the board, across physical and protocol layer, we're continuing to grow our contributions to this marketplace. Robert Jamieson Great. Thank you very much. Satish Dhanasekaran Thank you. Operator Rob Mason, Baird. Robert Mason Oh yes, good afternoon. Just a couple of questions. On the general electronics business, I'm curious just given all the realignment of supply chain activity, maybe it's round two versus tariffs the last time is as companies look at where they're manufacturing footprints need to reside. Can you just speak to maybe the impact on that business from a demand side and again, I'm maybe thinking more on the production test side if that's an then I'll just go ahead and ask my follow up. Neil could, just to think about the tariff impact in the third quarter, is it kind of roughly a doubling of what you experienced in the second? Neil Dougherty Yeah, I'll take the second first here. I think it's likely a little bit more than that. We had about three weeks of tariff impact in April versus obviously a full quarter. Now we have already taken some mitigation -- mitigating actions that have positive impact. So I don't think you can extrapolate totally forward from 8 million just based on the number of weeks -- sorry, 7 million, but it is a little bit more than a doubling. It is more than a doubling of what we saw in Q2 just given the time involved. Satish Dhanasekaran Yeah, I think, when you look at the general electronics business, given it's a broad, it's a broad marketplace for us in terms of the number of different types of applications that end market presence, we see no change in sort of the areas such as digital health and research because those are -- those tend to be durable in nature and the manufacturing parts of it do move around. So on one hand, China still remains weak in that I would say that there's a lot of recent conversations we're having with customers because they're trying to diversify their manufacturing footprint. Now it's not materially yet reflected in our results but could be an opportunity for us to engage in that we're working with our customers on. So it's still early days, but it's driven by the tariffs and what might happen. So there's a lot of scenario planning that's occurring and it'll probably be playing out over the next 90 to 180 days. Robert Mason I see. Thank you. Satish Dhanasekaran Thank you. Operator Adam Thalhimer, Thompson, Davis. Adam Thalhimer Hey, good afternoon guys, great quarter. Satish Dhanasekaran Thank you, Adam. Adam Thalhimer Can you parse through orders a little bit? I'm curious if there was any -- to what extent you saw pre-buy activity ahead of any surcharges and what our expectations should be for border trends after the surcharges went into effect. Satish Dhanasekaran Yeah, so I'd say just taking a look at the orders in Q2, orders progressed fairly linearly in the quarter. The funnel conversion was what we expected. We had a strong intake in the funnel as well, which is what we reflected into Q3. And then I would say April was strong, and in part because it's the end of our first half for our compensation for our sales force. So it does tend to have a no real change. We didn't see any difference in pull in, pull outs, or cancellations or anything of that kind. And that's why we -- our position is, while customers are watching the macro and evaluating the risk associated with it, we haven't seen any material change in customer behavior. Adam Thalhimer Good to hear. And then, secondly, I wanted to ask about Asia. The revenue there was really strong in the quarter and maybe you can just give some high-level thoughts on China demand. Satish Dhanasekaran Yeah, I would say Asia was strong. And again, it's across all of our segments really Commercial Communications being the leader, semiconductors saw strong demand as new nodes and new technologies such as silicon photonics are being deployed, and General Electronics also had some growth in in Asia.I would just maybe make a comment about China. Orders were flattish for the quarter in China, with strengths in a few sectors, but clearly the, as I mentioned before, the General Electronics with the manufacturing exposure was weak and automotive in China was also weak. We continue to monitor the POS demand, although we have a very small indirect business, we continue to monitor that. It seems largely in line. So China I would say continues to hold up well in this environment. Adam Thalhimer Thanks, Satish. Satish Dhanasekaran Thank you. Operator Samik Chatterjee, JPMorgan. Samik Chatterjee Hi, thanks for taking my question. Satish, maybe if I can -- Satish Dhanasekaran Hi, Samik. Samik Chatterjee Sort of try to -- hi, good to hear from, you. So on the drivers of wireline demand, and -- yeah, no, thank you. Drivers of wireline demand. I'm trying to sort of address that maybe in terms of how to think about sustainability and your customers clearly are doing well on volume, but how should we think about the strength you're seeing driven by progress on R&D from your customers related to maybe sort of what they're seeing on their volume outlook and driven by production. So maybe if you can share any color about, I know communications is very R&D aligned for you, but what does it look like for wireline?And is the demand you're seeing there, are you selling new testers when it comes to like either silicon phonics or CPO support, or are you just seeing more sort of customers buying just because their volume outlooks are stronger? Anything you can share on that front. And I have a follow up. Thank you. Satish Dhanasekaran Oh, good. That's a great question, Samik. I think, I would just say, when we looked at our wireline business, say a year or two ago, we've said the majority of the business R&D, and I would probably put it as 80/20-ish, roughly as the ratio of R&D to manufacturing. Now, we've probably seen a 10-point swing in the manufacturing in that area, but that's sort of where we are still heavily man R&D oriented. But we're clearly also benefiting from all of the manufacturing activity that's happening as the industry is trying to ramp for digital when I look at the portfolio of products that we service, all the way from only R&D to call it mainstream or R&D or validation through deployment, whether it is with our AWGs, birds, scopes, silicon photonics, wafer test systems, network analyzers, software with our AI benchmarking, and network speed emulators. So a pretty broad category of products that we're selling to. And actually, as we -- as I think about the whole first half, I would say the number of customers that participate in that has also grown for us, which it's a good sign that the ecosystem is expanding. As more companies are coming in and driven -- given that this is going to eventually be a longer-term when I look at some of the data trends that are going on and the standards progressions, really bodes well for R&D business, we'll have some times when we'll pick up manufacturing demand as well because we have a portfolio, but strategically, the R&D business is more valuable to us. Samik Chatterjee Okay, got it. And for my follow up, if I can sort of stay with the wireline demand but more sort of when we think about adoption of technologies like CPU and silicon photonics, I'm imagining sort of visualizing it as more of the test demand moves towards a bit more sort of semiconductor level testing. So anything you can share there in terms of how you see the comparative it change from what you've had historic in sort of 400gig, 800 gig. And do you think you have the sort of entire stack to address some of those complexities, or is there something that you need to add to the portfolio to address sort of when the overall sort of technology moves more closer to semiconductor testing? Satish Dhanasekaran No, you're very astute to pick up the change right between electrical to optical or that conversion. It's been an area of emphasis and investment for us, especially as these things go into silicon. This is why we invested about 18 months ago to intercept the demand from silicon photonics. We talked about this on a call as well, and we're now benefiting from that. That requires bringing together optical capabilities with our electrical capabilities and probing and complex really in our wheelhouse as a company to go after this opportunity. Co-packaged optics is another great example of what I saw from customers. I think that's accelerating as well. And if we need more capabilities, we can acquire talent, but I think we have a strong foundation to start with today that we actually at OFC we showcased multiple first-in-this-area 448 gig transmission, key enabler of 3.2 terabytes, and so on and so forth. So we had about 50 demonstrations. So it will continue to grow. But you're right, this is where the puck is moving to and we find ourselves having a strong foundation to intercept this. Samik Chatterjee Okay, great. Thank you. Thanks for taking my questions. Satish Dhanasekaran Thank you. Operator Mehdi Hosseini, SIG. Mehdi Hosseini Yes, thanks for letting me ask a question. I want to follow up on the wire line and, Satish, I just want to look at the big picture you talked about the connection is moving from copper to actually moving towards optical. And when you look at the entire market for both networking tests as well as the testing that happens with the component and component migrating to optical, would it be fair to say that your content would increase as you migrate from 800 gig to 1.2 terabytes and if content increases, including both system level tests and semiconductor, what is the magnitude of the increase or you can [audit] help us qualitatively or quantitatively. And I have a follow up. Satish Dhanasekaran Now, that's a -- look, I think I don't know that I would say that from what we see that it's either going to be electrical or optical. I think it's electrical for some applications where you obviously have a better sort of economics and then optical where you need the performance and it's where the puck is moving to. So I think this sort of hybrid is where the solutions are needed, and I think being a company that has both technologies, we find ourselves in a really good position across the stack, as you pointed out, memory, compute, networking, so on and so with regard to the magnitude of the opportunity, typically as the complexity goes up, we would see the types of solutions that customers need, especially in early R&D, tend to be more complex and therefore, we're adding more value to our customers as we get there. Now, as those technologies mature, obviously the puck moves to the next one, and therefore, the volume may drop on the previous technology. It's always the case that that happens, but the net effect of these overlapping waves of technology is it really supports our long-term growth expectations for the company that we have set to be in the 5% to 7% range. Mehdi Hosseini Okay. And then follow up for Neil. If I just take a midpoint of your remi for fiscal year '25, assuming that the sequential growth is stronger in October versus July and embedding the tariff impact into your margin profile, would it be fair to say that there is a slight decline in operating margin from April to July and it would go kind of sideways from July to October. So your fiscal year '25 uppity margin would be kind of flattish compared to fiscal year '24. Neil Dougherty One second. Yeah, I mean, I think as we look forward here, I think we're kind of range bound, I would say, in a pretty tight range. Obviously, we're going to see, we would expect to see a seasonal uplift here as we move from Q3 to Q4 but -- and as always, we would expect the abs and tariffs to continue to drive a strong incremental on that flow through. Mehdi Hosseini Okay, thank you. Operator That concludes our question-and-answer session for today. I would like to turn the call back to Paulenier Sims for any closing comments. Paulenier Sims Thank you, Tamia, and thank you, all, for joining us today. Have a great rest of your day. Operator This concludes our conference call. You may now disconnect. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-05-2025
- Business
- Yahoo
Keysight Technologies Reports Second Quarter 2025 Results
Achieves above guidance results, full-year outlook improved SANTA ROSA, Calif., May 20, 2025--(BUSINESS WIRE)--Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the second fiscal quarter ended April 30, 2025. "Keysight delivered strong second quarter results with revenue and earnings per share above the high end of guidance. This quarter's performance underscores the strength of our long-term strategy, deep customer engagement and disciplined execution," said Satish Dhanasekaran, Keysight's President and CEO. "Even as we are monitoring the overall macroeconomic environment, we continue to see a healthy funnel of opportunities and are raising full-year growth expectations to the midpoint of our long-term 5-7% target." Second Quarter Financial Summary Revenue was $1.31 billion, compared with $1.22 billion in the second quarter of 2024. GAAP net income was $257 million, or $1.49 per share, compared with $126 million, or $0.72 per share, in the second quarter of 2024. Non-GAAP net income was $295 million, or $1.70 per share, compared with $247 million, or $1.41 per share in the second quarter of 2024. Cash flow from operations was $484 million, compared to $110 million last year. Free cash flow was $457 million, compared to $74 million in the second quarter of 2024. As of April 30, 2025, cash and cash equivalents totaled $3.12 billion. Reporting Segments Communications Solutions Group (CSG) CSG reported revenue of $913 million in the second quarter, up 9 percent from the prior year, reflecting 9 percent growth in commercial communications and 9 percent growth in aerospace, defense, and government. Electronic Industrial Solutions Group (EISG) EISG reported revenue of $393 million in the second quarter, up 5 percent from the prior year, reflecting growth in semiconductor and general electronics, which was partially offset by a decline in automotive and energy. Outlook Keysight's third fiscal quarter of 2025 revenue is expected to be in the range of $1.305 billion to $1.325 billion. Non-GAAP earnings per share for the third fiscal quarter of 2025 are expected to be in the range of $1.63 to $1.69, based on a weighted diluted share count of approximately 173 million shares. 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 second quarter FY2025 financial results and its third quarter FY2025 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 under the "Upcoming Events" section and select "Q2 FY25 Keysight Technologies Inc. Earnings Conference Call" to participate. The call can also be accessed by dialing 1-404-975-4839 or 1-833-470-1428 toll-free (access code 420906). 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 "assume," "expect," "intend," "will," "should," "outlook" 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 global economic conditions such as inflation or recession, slowing demand for products or services, volatility in financial markets, reduced access to credit, increased interest rates; impacts of geopolitical tension and conflict outside of the U.S., export control regulations and compliance; net zero emissions commitments; 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 annual report on Form 10-K for the period ended October 31, 2024 and Keysight's quarterly report on Form 10-Q for the period ended January 31, 2025. Segment Data Segment data reflect the results of our reportable segments under our management reporting system. Segment data are provided on page 5 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 Net 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 and six months ended April 30, 2025. 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 Source: IR-KEYS KEYSIGHT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In millions, except per share data) (Unaudited) PRELIMINARY Three months ended Six months ended April 30, April 30, 2025 2024 2025 2024 Orders $ 1,316 $ 1,219 $ 2,579 $ 2,439 Revenue $ 1,306 $ 1,216 $ 2,604 $ 2,475 Costs and expenses: Cost of products and services 492 453 970 899 Research and development 250 228 499 460 Selling, general and administrative 360 361 721 723 Other operating expense (income), net (3 ) (3 ) (11 ) (5 ) Total costs and expenses 1,099 1,039 2,179 2,077 Income from operations 207 177 425 398 Interest income 21 18 40 41 Interest expense (20 ) (20 ) (40 ) (40 ) Other income (expense), net 112 — 94 5 Income before taxes 320 175 519 404 Provision for income taxes 63 49 93 106 Net income $ 257 $ 126 $ 426 $ 298 Net income per share: Basic $ 1.49 $ 0.73 $ 2.47 $ 1.71 Diluted $ 1.49 $ 0.72 $ 2.45 $ 1.70 Weighted average shares used in computing net income per share: Basic 172 174 173 175 Diluted 173 175 174 175 Page 1 KEYSIGHT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET (In millions, except par value and share data) (Unaudited) PRELIMINARY April 30, 2025 October 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 3,118 $ 1,796 Accounts receivable, net 758 857 Inventory 1,026 1,022 Other current assets 578 582 Total current assets 5,480 4,257 Property, plant and equipment, net 769 774 Operating lease right-of-use assets 226 234 Goodwill 2,433 2,388 Other intangible assets, net 556 607 Long-term investments 138 110 Long-term deferred tax assets 379 378 Other assets 568 521 Total assets $ 10,549 $ 9,269 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 317 $ 313 Employee compensation and benefits 319 295 Deferred revenue 626 561 Income and other taxes payable 175 90 Operating lease liabilities 46 43 Other accrued liabilities 145 125 Total current liabilities 1,628 1,427 Long-term debt 2,532 1,790 Retirement and post-retirement benefits 82 81 Long-term deferred revenue 218 206 Long-term operating lease liabilities 187 197 Other long-term liabilities 425 463 Total liabilities 5,072 4,164 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; 202 million and 201 million shares issued, respectively 2 2 Treasury stock, at cost; 29.9 million shares and 28.4 million shares, respectively (3,648 ) (3,422 ) Additional paid-in-capital 2,765 2,664 Retained earnings 6,651 6,225 Accumulated other comprehensive loss (293 ) (364 ) Total stockholders' equity 5,477 5,105 Total liabilities and equity $ 10,549 $ 9,269 Page 2 KEYSIGHT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In millions) (Unaudited) PRELIMINARY Six months ended April 30, 2025 2024 Cash flows from operating activities: Net income $ 426 $ 298 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 64 62 Amortization 70 76 Share-based compensation 98 82 Deferred tax expense (benefit) (40 ) (9 ) Excess and obsolete inventory-related charges 22 18 Unrealized loss (gain) on equity and other investments (23 ) (6 ) Other non-cash expenses (income), net 2 1 Changes in assets and liabilities, net of effects of businesses acquired: Accounts receivable 109 121 Inventory (18 ) (50 ) Accounts payable 7 (11 ) Employee compensation and benefits 20 (26 ) Deferred revenue 66 14 Income taxes payable 56 (35 ) Other assets and liabilities 3 (97 ) Net cash provided by operating activities(a) 862 438 Cash flows from investing activities: Investments in property, plant and equipment (59 ) (83 ) Acquisitions of businesses and intangible assets, net of cash acquired (3 ) (556 ) Other investing activities (4 ) 8 Net cash used in investing activities (66 ) (631 ) Cash flows from financing activities: Proceeds from issuance of common stock under employee stock plans 31 33 Payment of taxes related to net share settlement of equity awards (29 ) (28 ) Proceeds from issuance of long-term debt 748 — Acquisition of non-controlling interests — (458 ) Treasury stock repurchases, including excise tax payments (228 ) (139 ) Debt issuance costs (7 ) (5 ) Repayment of debt — (24 ) Net cash provided by (used in) financing activities 515 (621 ) Effect of exchange rate movements 10 — Net increase (decrease) in cash, cash equivalents, and restricted cash 1,321 (814 ) Cash, cash equivalents, and restricted cash at beginning of period 1,814 2,488 Cash, cash equivalents, and restricted cash at end of period $ 3,135 $ 1,674 (a) Cash payments included in operating activities: Interest payments $ 39 $ 38 Income tax paid, net $ 44 $ 146 Page 3 KEYSIGHT TECHNOLOGIES, INC. NET INCOME AND DILUTED EPS RECONCILIATION (In millions, except per share data) (Unaudited) PRELIMINARY Three months ended Six months ended April 30, April 30, 2025 2024 2025 2024 Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted EPS GAAP Net income $ 257 $ 1.49 $ 126 $ 0.72 $ 426 $ 2.45 $ 298 $ 1.70 Non-GAAP adjustments: Amortization of acquisition-related balances 34 0.19 37 0.21 67 0.38 75 0.43 Share-based compensation 37 0.22 36 0.21 99 0.57 86 0.49 Acquisition and integration costs (benefits) (74 ) (0.42 ) 27 0.15 24 0.14 40 0.23 Restructuring and others 26 0.15 23 0.14 2 0.01 38 0.22 Adjustment for taxes(a) 15 0.07 (2 ) (0.02 ) (6 ) (0.03 ) (4 ) (0.03 ) Non-GAAP Net income $ 295 $ 1.70 $ 247 $ 1.41 $ 612 $ 3.52 $ 533 $ 3.04 Weighted average shares outstanding - diluted 173 175 174 175 (a) For the three and six months ended April 30, 2025, management uses a non-GAAP effective tax rate of 14% and for the three and six months ended April 30, 2024, management uses a non-GAAP effective tax rate of 17%. Please refer to the last page for details on the use of non-GAAP financial measures. Page 4 KEYSIGHT TECHNOLOGIES, INC. SEGMENT RESULTS INFORMATION (In millions, except where noted) (Unaudited) PRELIMINARY Communications Solutions Group Percent Q2'25 Q2'24 Inc/(Dec) Revenue $ 913 $ 840 9% Gross margin, % 67 % 68 % Income from operations $ 236 $ 223 Operating margin, % 26 % 27 % Electronic Industrial Solutions Group Percent Q2'25 Q2'24 Inc/(Dec) Revenue $ 393 $ 376 5% Gross margin, % 59 % 58 % Income from operations $ 92 $ 71 Operating margin, % 23 % 19 % Segment revenue and income from operations are consistent with the respective non-GAAP financial measures as discussed on last page. Page 5 KEYSIGHT TECHNOLOGIES, INC. FREE CASH FLOW (In millions) (Unaudited) PRELIMINARY Three months ended Six months ended April 30, April 30, 2025 2024 2025 2024 Net cash provided by operating activities $ 484 $ 110 $ 862 $ 438 Less: Investments in property, plant and equipment (27 ) (36 ) (59 ) (83 ) Free cash flow $ 457 $ 74 $ 803 $ 355 Please refer to the last page for details on the use of non-GAAP financial measures. Page 6 KEYSIGHT TECHNOLOGIES, INC. REVENUE BY END MARKETS (In millions) (Unaudited) PRELIMINARY Percent Q2'25 Q2'24 Inc/(Dec) Aerospace, Defense and Government $ 301 $ 277 9% Commercial Communications 612 563 9% Electronic Industrial 393 376 5% Total Revenue $ 1,306 $ 1,216 7% Page 7 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. Core Revenue is revenue excluding the impact of foreign currency changes and revenue associated with 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 cash provided by operating activities adjusted for net 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. We also exclude other acquisition and integration costs associated with business acquisitions that are not normal recurring operating expenses, including gain/loss on foreign exchange contracts 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 including those of acquired entities, 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 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, adjustment attributable to non-controlling interest, 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 third quarter of fiscal 2025 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 8 View source version on Contacts INVESTOR CONTACT:Investor Relations+1 MEDIA CONTACT:Andrea Mueller+ 1 Sign in to access your portfolio
Business Wire
20-05-2025
- Business
- Business Wire
Keysight Technologies Reports Second Quarter 2025 Results
SANTA ROSA, Calif.--(BUSINESS WIRE)-- Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the second fiscal quarter ended April 30, 2025. 'Keysight delivered strong second quarter results with revenue and earnings per share above the high end of guidance. This quarter's performance underscores the strength of our long-term strategy, deep customer engagement and disciplined execution,' said Satish Dhanasekaran, Keysight's President and CEO. 'Even as we are monitoring the overall macroeconomic environment, we continue to see a healthy funnel of opportunities and are raising full-year growth expectations to the midpoint of our long-term 5-7% target.' Second Quarter Financial Summary Revenue was $1.31 billion, compared with $1.22 billion in the second quarter of 2024. GAAP net income was $257 million, or $1.49 per share, compared with $126 million, or $0.72 per share, in the second quarter of 2024. Non-GAAP net income was $295 million, or $1.70 per share, compared with $247 million, or $1.41 per share in the second quarter of 2024. Cash flow from operations was $484 million, compared to $110 million last year. Free cash flow was $457 million, compared to $74 million in the second quarter of 2024. As of April 30, 2025, cash and cash equivalents totaled $3.12 billion. Reporting Segments Communications Solutions Group (CSG) CSG reported revenue of $913 million in the second quarter, up 9 percent from the prior year, reflecting 9 percent growth in commercial communications and 9 percent growth in aerospace, defense, and government. Electronic Industrial Solutions Group (EISG) EISG reported revenue of $393 million in the second quarter, up 5 percent from the prior year, reflecting growth in semiconductor and general electronics, which was partially offset by a decline in automotive and energy. Outlook Keysight's third fiscal quarter of 2025 revenue is expected to be in the range of $1.305 billion to $1.325 billion. Non-GAAP earnings per share for the third fiscal quarter of 2025 are expected to be in the range of $1.63 to $1.69, based on a weighted diluted share count of approximately 173 million shares. 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 second quarter FY2025 financial results and its third quarter FY2025 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 under the ' Upcoming Events ' section and select ' Q2 FY25 Keysight Technologies Inc. Earnings Conference Call ' to participate. The call can also be accessed by dialing 1-404-975-4839 or 1-833-470-1428 toll-free (access code 420906). 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 "assume," 'expect,' 'intend,' 'will,' 'should,' "outlook" 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 global economic conditions such as inflation or recession, slowing demand for products or services, volatility in financial markets, reduced access to credit, increased interest rates; impacts of geopolitical tension and conflict outside of the U.S., export control regulations and compliance; net zero emissions commitments; 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 annual report on Form 10-K for the period ended October 31, 2024 and Keysight's quarterly report on Form 10-Q for the period ended January 31, 2025. Segment Data Segment data reflect the results of our reportable segments under our management reporting system. Segment data are provided on page 5 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 Net 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 and six months ended April 30, 2025. 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 Source: IR-KEYS KEYSIGHT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET (In millions, except par value and share data) (Unaudited) PRELIMINARY October 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 3,118 $ 1,796 Accounts receivable, net 758 857 Inventory 1,026 1,022 Other current assets 578 582 Total current assets 5,480 4,257 Property, plant and equipment, net 769 774 Operating lease right-of-use assets 226 234 Goodwill 2,433 2,388 Other intangible assets, net 556 607 Long-term investments 138 110 Long-term deferred tax assets 379 378 Other assets 568 521 Total assets $ 10,549 $ 9,269 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 317 $ 313 Employee compensation and benefits 319 295 Deferred revenue 626 561 Income and other taxes payable 175 90 Operating lease liabilities 46 43 Other accrued liabilities 145 125 Total current liabilities 1,628 1,427 Long-term debt 2,532 1,790 Retirement and post-retirement benefits 82 81 Long-term deferred revenue 218 206 Long-term operating lease liabilities 187 197 Other long-term liabilities 425 463 Total liabilities 5,072 4,164 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; 202 million and 201 million shares issued, respectively 2 2 Treasury stock, at cost; 29.9 million shares and 28.4 million shares, respectively (3,648 ) (3,422 ) Additional paid-in-capital 2,765 2,664 Retained earnings 6,651 6,225 Accumulated other comprehensive loss (293 ) (364 ) Total stockholders' equity 5,477 5,105 Total liabilities and equity $ 10,549 $ 9,269 Page 2 Expand KEYSIGHT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In millions) (Unaudited) PRELIMINARY Six months ended April 30, 2025 2024 Cash flows from operating activities: Net income $ 426 $ 298 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 64 62 Amortization 70 76 Share-based compensation 98 82 Deferred tax expense (benefit) (40 ) (9 ) Excess and obsolete inventory-related charges 22 18 Unrealized loss (gain) on equity and other investments (23 ) (6 ) Other non-cash expenses (income), net 2 1 Changes in assets and liabilities, net of effects of businesses acquired: Accounts receivable 109 121 Inventory (18 ) (50 ) Accounts payable 7 (11 ) Employee compensation and benefits 20 (26 ) Deferred revenue 66 14 Income taxes payable 56 (35 ) Other assets and liabilities 3 (97 ) Net cash provided by operating activities (a) 862 438 Cash flows from investing activities: Investments in property, plant and equipment (59 ) (83 ) Acquisitions of businesses and intangible assets, net of cash acquired (3 ) (556 ) Other investing activities (4 ) 8 Net cash used in investing activities (66 ) (631 ) Cash flows from financing activities: Proceeds from issuance of common stock under employee stock plans 31 33 Payment of taxes related to net share settlement of equity awards (29 ) (28 ) Proceeds from issuance of long-term debt 748 — Acquisition of non-controlling interests — (458 ) Treasury stock repurchases, including excise tax payments (228 ) (139 ) Debt issuance costs (7 ) (5 ) Repayment of debt — (24 ) Net cash provided by (used in) financing activities 515 (621 ) Effect of exchange rate movements 10 — Net increase (decrease) in cash, cash equivalents, and restricted cash 1,321 (814 ) (a) Cash payments included in operating activities: Interest payments $ 39 $ 38 Income tax paid, net $ 44 $ 146 Page 3 Expand KEYSIGHT TECHNOLOGIES, INC. NET INCOME AND DILUTED EPS RECONCILIATION (In millions, except per share data) (Unaudited) PRELIMINARY Three months ended Six months ended April 30, April 30, 2025 2024 2025 2024 Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted EPS GAAP Net income $ 257 $ 1.49 $ 126 $ 0.72 $ 426 $ 2.45 $ 298 $ 1.70 Non-GAAP adjustments: Amortization of acquisition-related balances 34 0.19 37 0.21 67 0.38 75 0.43 Share-based compensation 37 0.22 36 0.21 99 0.57 86 0.49 Acquisition and integration costs (benefits) (74 ) (0.42 ) 27 0.15 24 0.14 40 0.23 Restructuring and others 26 0.15 23 0.14 2 0.01 38 0.22 Adjustment for taxes (a) 15 0.07 (2 ) (0.02 ) (6 ) (0.03 ) (4 ) (0.03 ) Non-GAAP Net income $ 295 $ 1.70 $ 247 $ 1.41 $ 612 $ 3.52 $ 533 $ 3.04 Weighted average shares outstanding - diluted 173 175 174 175 (a) For the three and six months ended April 30, 2025, management uses a non-GAAP effective tax rate of 14% and for the three and six months ended April 30, 2024, management uses a non-GAAP effective tax rate of 17%. Please refer to the last page for details on the use of non-GAAP financial measures. Page 4 Expand KEYSIGHT TECHNOLOGIES, INC. SEGMENT RESULTS INFORMATION (In millions, except where noted) (Unaudited) PRELIMINARY Communications Solutions Group Percent Q2'25 Q2'24 Inc/(Dec) Revenue $ 913 $ 840 9% Gross margin, % 67 % 68 % Income from operations $ 236 $ 223 Operating margin, % 26 % 27 % Electronic Industrial Solutions Group Percent Q2'25 Q2'24 Inc/(Dec) Revenue $ 393 $ 376 5% Gross margin, % 59 % 58 % Income from operations $ 92 $ 71 Operating margin, % 23 % 19 % Segment revenue and income from operations are consistent with the respective non-GAAP financial measures as discussed on last page. Page 5 Expand KEYSIGHT TECHNOLOGIES, INC. FREE CASH FLOW (In millions) (Unaudited) PRELIMINARY Three months ended Six months ended April 30, April 30, 2025 2024 2025 2024 Net cash provided by operating activities $ 484 $ 110 $ 862 $ 438 Less: Investments in property, plant and equipment (27 ) (36 ) (59 ) (83 ) Free cash flow $ 457 $ 74 $ 803 $ 355 Please refer to the last page for details on the use of non-GAAP financial measures. Page 6 Expand 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. Core Revenue is revenue excluding the impact of foreign currency changes and revenue associated with 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 cash provided by operating activities adjusted for net 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. We also exclude other acquisition and integration costs associated with business acquisitions that are not normal recurring operating expenses, including gain/loss on foreign exchange contracts 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 including those of acquired entities, 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, adjustment attributable to non-controlling interest, 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 third quarter of fiscal 2025 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 8
Yahoo
26-02-2025
- Business
- Yahoo
Keysight Technologies tops quarterly profit estimates, forecasts strong second quarter
(Reuters) - Electronic equipment maker Keysight Technologies expects its second-quarter profit to surpass analysts' estimates, following a robust quarterly profit on Tuesday. Demand for AI-related technology has been strong over the past year, fueled by data center requirements. "The demand environment remains consistent with our view of a gradual recovery in 2025," said CEO Satish Dhanasekaran. See for yourself — The Yodel is the go-to source for daily news, entertainment and feel-good stories. By signing up, you agree to our Terms and Privacy Policy. Keysight provides electronic design, testing and software products, such as oscilloscopes and network emulators used in radar, satellites and space programs, as well as commercial and military aircraft. The company expects earnings for the second quarter of fiscal 2025 to be in the range of $1.61 to $1.67 per share, compared to the analysts' mean estimate of $1.59 apiece, according to data compiled by LSEG. In addition, the company serves customers spanning across automotive, energy, semiconductor and general electronics end markets. In December, the company said that U.S. tariffs imposed on imports from China could impact its business. On an adjusted basis, the California-based company posted per-share earnings of $1.82 in the first quarter, compared to the consensus estimate of $1.69 per share. The overall revenue in the quarter came in at $1.3 billion, compared with analysts' average estimate of $1.28 billion.
Reuters
25-02-2025
- Business
- Reuters
Keysight Technologies tops quarterly profit estimates, forecasts strong second quarter
Feb 25 (Reuters) - Electronic equipment maker Keysight Technologies (KEYS.N), opens new tab expects its second-quarter profit to surpass analysts' estimates, following a robust quarterly profit on Tuesday. Demand for AI-related technology has been strong over the past year, fueled by data center requirements. "The demand environment remains consistent with our view of a gradual recovery in 2025," said CEO Satish Dhanasekaran. Keysight provides electronic design, testing and software products, such as oscilloscopes and network emulators used in radar, satellites and space programs, as well as commercial and military aircraft. The company expects earnings for the second quarter of fiscal 2025 to be in the range of $1.61 to $1.67 per share, compared to the analysts' mean estimate of $1.59 apiece, according to data compiled by LSEG. In addition, the company serves customers spanning across automotive, energy, semiconductor and general electronics end markets. In December, the company said that U.S. tariffs imposed on imports from China could impact its business. On an adjusted basis, the California-based company posted per-share earnings of $1.82 in the first quarter, compared to the consensus estimate of $1.69 per share. The overall revenue in the quarter came in at $1.3 billion, compared with analysts' average estimate of $1.28 billion.
