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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE) 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED JULY 31, 2024

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. 

FOR THE TRANSITION PERIOD FROM              TO        

 COMMISSION FILE NUMBER: 001-36334

 KEYSIGHT TECHNOLOGIES, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware		46-4254555
(State or other jurisdiction of		(IRS employer
incorporation or organization)		Identification no.)
1400 Fountaingrove Parkway
Santa Rosa	California	95403
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (800) 829-4444

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	KEYS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a)of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒ 

The number of shares of common stock outstanding at August 26, 2024 was 173,543,355.

Table of Contents

TABLE OF CONTENTS

			Page Number
Part I.	Financial Information		3
	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
		Condensed Consolidated Statement of Operations	3
		Condensed Consolidated Statement of Comprehensive Income	4
		Condensed Consolidated Balance Sheet	5
		Condensed Consolidated Statement of Cash Flows	6
		Condensed Consolidated Statement of Equity	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	38
Part II.	Other Information		38
	Item 1.	Legal Proceedings	38
	Item 1A.	Risk Factors	38
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
	Item 5.	Other Information	53
	Item 6.	Exhibits	54
Signatures			55

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023
Revenue:
Products	$	900	$	1,099	$	2,761	$	3,321
Services and other	317		283		931		832
Total revenue	1,217		1,382		3,692		4,153
Costs and expenses:
Cost of products	360		391		1,069		1,180
Cost of services and other	102		95		292		285
Total costs	462		486		1,361		1,465
Research and development	226		215		686		664
Selling, general and administrative	329		319		1,052		994
Other operating expense (income), net	(5)		(3)		(10)		(11)
Total costs and expenses	1,012		1,017		3,089		3,112
Income from operations	205		365		603		1,041
Interest income	19		29		60		70
Interest expense	(21)		(19)		(61)		(58)
Other income (expense), net	10		14		15		28
Income before taxes	213		389		617		1,081
Provision (benefit) for income taxes	(176)		101		(70)		250
Net income	$	389	$	288	$	687	$	831
Net income per share:
Basic	$	2.23	$	1.62	$	3.94	$	4.66
Diluted	$	2.22	$	1.61	$	3.92	$	4.63
Weighted average shares used in computing net income per share:
Basic	174		178		174		178
Diluted	175		179		175		179

The accompanying notes are an integral part of these condensed consolidated financial statements.

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023
Net income	$	389	$	288	$	687	$	831
Other comprehensive income (loss):
Gain (loss) on derivative instruments, net of tax benefit (expense) of zero, $(1), zero and $5	—		2		1		(18)
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero, $1, $1 and $1	(3)		—		(7)		(3)
Foreign currency translation, net of tax benefit (expense) of zero	32		(9)		27		61
Net defined benefit pension cost and post-retirement plan costs:
Change in net actuarial loss, net of tax expense of $1, $1, $3 and $3	3		4		8		12
Other comprehensive income (loss)	32		(3)		29		52
Total comprehensive income	$	421	$	285	$	716	$	883

    

The accompanying notes are an integral part of these condensed consolidated financial statements.

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions, except par value and share data)

(Unaudited)

	July 31, 2024		October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,632	$	2,472
Accounts receivable, net	802		900
Inventory	1,026		985
Other current assets	536		452
Total current assets	3,996		4,809
Property, plant and equipment, net	776		761
Operating lease right-of-use assets	234		226
Goodwill	2,391		1,640
Other intangible assets, net	637		155
Long-term investments	107		81
Long-term deferred tax assets	678		671
Other assets	504		340
Total assets	$	9,323	$	8,683
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	600	$	599
Accounts payable	280		286
Employee compensation and benefits	262		304
Deferred revenue	537		541
Income and other taxes payable	85		90
Operating lease liabilities	43		40
Other accrued liabilities	142		189
Total current liabilities	1,949		2,049
Long-term debt	1,196		1,195
Retirement and post-retirement benefits	71		64
Long-term deferred revenue	207		216
Long-term operating lease liabilities	197		192
Other long-term liabilities	473		313
Total liabilities	4,093		4,029
Commitments and contingencies (Note 13)
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: 201 million and 200 million, respectively	2		2
Treasury stock, at cost; 27.5 million shares and 25.4 million shares, respectively	(3,270)		(2,980)
Additional paid-in-capital	2,637		2,487
Retained earnings	6,298		5,611
Accumulated other comprehensive loss	(437)		(466)
Total stockholders' equity	5,230		4,654
Total liabilities and equity	$	9,323	$	8,683

 The accompanying notes are an integral part of these condensed consolidated financial statements.

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

(Unaudited)

	Nine Months Ended
	July 31,
	2024		2023
Cash flows from operating activities:
Net income	$	687	$	831
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	94		90
Amortization	108		72
Share-based compensation	111		110
Deferred tax expense (benefit)	(21)		10
Excess and obsolete inventory-related charges	26		19
Other non-cash expense (income), net	(5)		(13)
Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable	130		32
Inventory	(51)		(126)
Accounts payable	(4)		(54)
Employee compensation and benefits	(69)		(87)
Deferred revenue	(35)		41
Income taxes payable	(24)		(28)
Interest rate swap agreement termination proceeds	—		107
Prepaid assets	(25)		(33)
Long-term tax receivable	(165)		—
Other assets and liabilities	(64)		59
Net cash provided by operating activities	693		1,030
Cash flows from investing activities:
Investments in property, plant and equipment	(116)		(158)
Acquisition of businesses and intangible assets, net of cash acquired	(673)		(85)
Other investing activities	8		(7)
Net cash used in investing activities	(781)		(250)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans	65		67
Payment of taxes related to net share settlement of equity awards	(31)		(49)
Acquisition of non-controlling interests	(458)		—
Treasury stock repurchases	(289)		(276)
Repayment of debt	(24)		—
Other financing activities	(16)		(1)
Net cash used in financing activities	(753)		(259)
Effect of exchange rate movements	2		10
Net increase (decrease) in cash, cash equivalents, and restricted cash	(839)		531
Cash, cash equivalents, and restricted cash at beginning of period	2,488		2,057
Cash, cash equivalents, and restricted cash at end of period	$	1,649	$	2,588
Supplemental cash flow information:
Interest payments	$	38	$	37
Income tax paid, net	$	130	$	268
Investments in property, plant and equipment included in accounts payable	$	17	$	23

The accompanying notes are an integral part of these condensed consolidated financial statements.

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

(Unaudited)

	Common Stock					Treasury Stock
	Number of Shares	Par Value		Additional Paid-in Capital		Number of Shares	Treasury Stock at Cost		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total Stockholders' Equity
Balance as of April 30, 2024	200,655	$	2	$	2,580	(26,376)	$	(3,119)	$	5,909	$	(469)	$	—	$	4,903
Net income	—	—		—		—	—		389		—		—		389
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		32		—		32
Issuance of common stock	315	—		32		—	—		—		—		—		32
Taxes related to net share settlement of equity awards	—	—		(3)		—	—		—		—		—		(3)
Share-based compensation	—	—		28		—	—		—		—		—		28
Repurchase of common stock	—	—		—		(1,074)	(151)		—		—		—		(151)
Balance as of July 31, 2024	200,970	$	2	$	2,637	(27,450)	$	(3,270)	$	6,298	$	(437)	$	—	$	5,230
Balance as of October 31, 2023	199,771	$	2	$	2,487	(25,449)	$	(2,980)	$	5,611	$	(466)	$	—	$	4,654
Net income	—	—		—		—	—		687		—		4		691
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		29		—		29
ESI Group acquisition	—	—		—		—	—		—		—		458		458
Issuance of common stock	1,199	—		65		—	—		—		—		—		65
Taxes related to net share settlement of equity awards	—	—		(31)		—	—		—		—		—		(31)
Share-based compensation	—	—		112		—	—		—		—		—		112
Repurchase of common stock	—	—		—		(2,001)	(290)		—		—		—		(290)
Acquisition of non-controlling interests	—	—		4		—	—		—		—		(462)		(458)
Balance as of July 31, 2024	200,970	$	2	$	2,637	(27,450)	$	(3,270)	$	6,298	$	(437)	$	—	$	5,230
Balance as of April 30, 2023	199,398	$	2	$	2,404	(21,247)	$	(2,399)	$	5,097	$	(399)	$	—	$	4,705
Net income	—	—		—		—	—		288		—		—		288
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		(3)		—		(3)
Issuance of common stock	350	—		34		—	—		—		—		—		34
Taxes related to net share settlement of equity awards	—	—		(2)		—	—		—		—		—		(2)
Share-based compensation	—	—		26		—	—		—		—		—		26
Repurchase of common stock	—	—		—		(929)	(151)		—		—		—		(151)
Balance as of July 31, 2023	199,748	$	2	$	2,462	(22,176)	$	(2,550)	$	5,385	$	(402)	$	—	$	4,897
Balance as of October 31, 2022	198,569	$	2	$	2,333	(20,536)	$	(2,274)	$	4,554	$	(454)	$	—	$	4,161
Net income	—	—		—		—	—		831		—		—		831
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		52		—		52
Issuance of common stock	1,179	—		67		—	—		—		—		—		67
Taxes related to net share settlement of equity awards	—	—		(49)		—	—		—		—		—		(49)
Share-based compensation	—	—		111		—	—		—		—		—		111
Repurchase of common stock	—	—		—		(1,640)	(276)		—		—		—		(276)
Balance as of July 31, 2023	199,748	$	2	$	2,462	(22,176)	$	(2,550)	$	5,385	$	(402)	$	—	$	4,897

The accompanying notes are an integral part of these condensed consolidated financial statements.

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KEYSIGHT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview. Keysight Technologies, Inc. (“we,” “us,” “Keysight” or the “company”), incorporated in Delaware on December 6, 2013, is a global innovator in the computing, communications and electronics market, committed to advancing our customers’ business success by helping them solve critical challenges in the development and commercialization of their products and services. Our mission, “accelerating innovation to connect and secure the world,” speaks to the value we provide our customers in a world of ever-increasing technological complexity. We deliver this value through a broad range of design and test solutions that address the critical challenges our customers face in bringing their innovations to market faster.

Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarters.

Basis of Presentation. We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The accompanying financial statements and information should be read in conjunction with our Annual Report on Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly our financial position as of July 31, 2024 and October 31, 2023, results of operations for the three and nine months ended July 31, 2024 and 2023, and cash flows for the nine months ended July 31, 2024 and 2023.

Principles of consolidation. The condensed consolidated financial statements include the accounts of the company and our wholly- and majority-owned subsidiaries. All significant inter-company transactions have been eliminated. The condensed consolidated financial statements also reflect the impact of non-controlling interests. Non-controlling interests do not have a significant impact on the condensed consolidated results of operations; therefore, net income attributable to non-controlling interests for the nine months ended July 31, 2024 of $4 million is not presented separately and is included in “other income (expense), net” in the condensed consolidated statements of operations.

Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

Update to Significant Accounting Policies. There have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

New Accounting Pronouncements. Amendments to GAAP that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption.

2.    ACQUISITIONS

Acquisition of ESI Group SA

On November 3, 2023, we acquired 50.6% of the share capital of ESI Group SA (“ESI Group”) for $477 million, net of cash acquired, using existing cash. During January 2024, we completed the acquisition of the remaining share capital of ESI Group for $458 million, using existing cash. The company entered into put/call agreements valued at $7 million for certain ESI Group equity awards, subject to a holding period that may extend beyond the explicit vesting period, for the right to receive a cash payment equal to the public tender offer consideration of 155 euros per share, which was substantially paid in the third quarter of fiscal year 2024. For the three and nine months ended July 31, 2024, ESI Group's net revenue was $25 million and $119 million, respectively. For the three and nine months ended July 31, 2024, ESI Group's net loss attributable to Keysight shareholders was $27 million and $47 million, respectively.

The ESI Group acquisition was accounted for in accordance with the authoritative accounting guidance. The acquired assets and assumed liabilities were recorded by Keysight at their estimated fair values. Keysight determined the estimated fair values with the assistance of valuations performed by third party specialists, discounted cash flow analysis, and estimates made by management. The acquisition of ESI Group expands our application layer portfolio with simulation capabilities that are

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critical to accelerate innovation in multiple end markets. These factors, among others, contributed to a purchase price in excess of the estimated fair value of ESI Group's net identifiable assets acquired (see summary of net assets below), and, as a result, we have recorded goodwill in connection with this transaction.

Goodwill was assigned to the Communications Solutions Group (“CSG”) and the Electronic Industrial Solutions Group (“EISG”) reportable segments, based on the expected benefits and synergies that are likely to be realized from the ESI Group acquisition. We do not expect the goodwill recognized or any potential impairment charges in the future to be deductible for income tax purposes.

A portion of the overall purchase price was allocated to acquired intangible assets. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Therefore, a deferred tax liability of $98 million was established primarily for the future amortization of these intangibles and is included in “other long-term liabilities” in the table below.

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date:

	November 3, 2023
	(in millions)
Cash and cash equivalents	$	35
Short-term investments	12
Accounts receivable	28
Other current assets	18
Property, plant and equipment	4
Operating lease right-of-use assets	8
Goodwill	603
Other intangible assets	494
Other assets	3
Total assets acquired	1,205
Accounts payable	(8)
Employee compensation and benefits	(23)
Deferred revenue	(14)
Income and other taxes payable	(11)
Operating lease liabilities	(3)
Other accrued liabilities	(18)
Debt	(24)
Retirement and post-retirement benefits	(7)
Long-term operating lease liabilities	(5)
Other long-term liabilities	(115)
Net assets acquired	$	977

The fair values of cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable, employee compensation and benefits, and deferred revenue were generally determined using historical carrying values given the short-term nature of these assets and liabilities. The fair value for intangible assets was determined with the input from third-party valuation specialists. The fair values of property, plant and equipment and certain other liabilities were determined internally using historical carrying values and estimates made by management. During the second quarter of fiscal year 2024, the company decreased the deferred tax liability and goodwill by $8 million primarily for a timing difference in the recognition of research and development expenses. During the third quarter of fiscal year 2024, the company increased income and other taxes payable and other long-term liabilities by $3 million and $5 million, respectively, offset against goodwill, primarily for tax liabilities and uncertain tax positions. As additional information becomes available, we may revise the preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material.

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Valuation of Intangible Assets Acquired

The components of intangible assets acquired in connection with the ESI Group acquisition were as follows:

	Estimated Fair Value		Estimated useful life
	(in millions)		(in years)
Developed technology	$	270	6
Customer relationships	160		6
Backlog	15		3
Trademarks/Tradename	2		2
Total amortizable intangible assets	447
In-process research and development	47
Total intangible assets	$	494

As noted above, the intangible assets were valued with input from valuation specialists using the income approach, which includes the discounted cash flow, with and without, and relief from royalty methods. The in-process research and development was valued using the multi-period excess earnings method under the income approach by discounting forecasted cash flows directly related to the products expecting to result from the projects, net of returns on contributory assets. A discount rate of 12% was used to value the research and development projects to reflect the additional risks inherent in the acquired projects. The primary in-process projects acquired relate to next generation products which will be released in the near future. Total costs to complete for all ESI Group in-process research and development were estimated at approximately $7 million as of the close date.

Acquisition and integration costs directly related to the ESI Group acquisition are recorded in selling, general and administrative expenses, other operating expense (income), net and other income (expense), net, and were $9 million and $30 million for the three and nine months ended July 31, 2024, respectively. For the three and nine months ended July 31, 2024, we incurred $3 million and $9 million, respectively, of acquisition-related compensation expense to redeem certain of ESI Group's outstanding unvested stock awards as of the date of the acquisition that were determined to relate to post-merger service periods.

The following represents pro forma operating results as if ESI Group had been included in the company's condensed consolidated statements of operations as of the beginning of fiscal 2023:

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023
	(in millions, except per-share amounts)
Net revenue	$	1,217	$	1,409	$	3,692	$	4,276
Net income	$	398	$	260	$	717	$	785
Net income per share - Basic	$	2.28	$	1.46	$	4.11	$	4.41
Net income per share - Diluted	$	2.27	$	1.45	$	4.09	$	4.38

The unaudited pro forma financial information for the three and nine months ended July 31, 2024 and 2023 combines the historical results of Keysight and ESI Group for the three and nine months ended July 31, 2024 and 2023, assuming that the companies were combined as of November 1, 2022 and includes business combination accounting effects from the acquisition including amortization charges from acquired intangible assets and tax-related effects. The pro forma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2023.

Acquisition of Riscure Holding B.V.

On February 21, 2024, we acquired all the outstanding share capital of Riscure Holding B.V. (“Riscure”) for $78 million, net of cash acquired, expanding our automated security assessment capabilities and solutions for semiconductors, embedded systems, and connected devices. We recognized goodwill and other intangible assets of $52 million and $35 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. Goodwill was assigned to the CSG reportable segment, based on the expected benefits and synergies that are likely to be realized from the Riscure acquisition. We do not expect the goodwill recognized or any potential impairment charges in the future to be deductible for income tax purposes.

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Acquisition of AnaPico AG

On June 12, 2024, we acquired all the outstanding share capital of AnaPico AG (“AnaPico”) for $117 million, net of cash acquired, accelerating our strategy to expand our customer base in chipset, device, automotive, aerospace, defense, and government markets. We recognized goodwill and other intangible assets of $65 million and $53 million respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. Goodwill was assigned to the CSG and the EISG reportable segments, based on the expected benefits and synergies that are likely to be realized from the AnaPico acquisition. We do not expect the goodwill recognized or any potential impairment charges in the future to be deductible for income tax purposes.

3.    REVENUE

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of revenue recognition, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregated revenue is presented for each of our reportable segments, CSG and EISG.

	Three Months Ended
	July 31,
	2024						2023
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Region
Americas	$	402	$	98	$	500	$	446	$	110	$	556
Europe	125		96		221		139		104		243
Asia Pacific	320		176		496		333		250		583
Total revenue	$	847	$	370	$	1,217	$	918	$	464	$	1,382
End Market
Aerospace, Defense & Government	$	275	$	—	$	275	$	307	$	—	$	307
Commercial Communications	572		—		572		611		—		611
Electronic Industrial	—		370		370		—		464		464
Total revenue	$	847	$	370	$	1,217	$	918	$	464	$	1,382
Timing of Revenue Recognition
Revenue recognized at a point in time	$	660	$	298	$	958	$	749	$	395	$	1,144
Revenue recognized over time	187		72		259		169		69		238
Total revenue	$	847	$	370	$	1,217	$	918	$	464	$	1,382

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	Nine Months Ended
	July 31,
	2024						2023
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Region
Americas	$	1,216	$	290	$	1,506	$	1,322	$	312	$	1,634
Europe	384		320		704		414		315		729
Asia Pacific	926		556		1,482		1,058		732		1,790
Total revenue	$	2,526	$	1,166	$	3,692	$	2,794	$	1,359	$	4,153
End Market
Aerospace, Defense & Government	$	847	$	—	$	847	$	927	$	—	$	927
Commercial Communications	1,679		—		1,679		1,867		—		1,867
Electronic Industrial	—		1,166		1,166		—		1,359		1,359
Total revenue	$	2,526	$	1,166	$	3,692	$	2,794	$	1,359	$	4,153
Timing of Revenue Recognition
Revenue recognized at a point in time	$	1,972	$	951	$	2,923	$	2,301	$	1,165	$	3,466
Revenue recognized over time	554		215		769		493		194		687
Total revenue	$	2,526	$	1,166	$	3,692	$	2,794	$	1,359	$	4,153

Our point-in-time revenues are generated predominantly from the sale of various types of design and test software and hardware, and per-incident repair and calibration services. Perpetual software and the portion of term software subscription revenue in this category represent revenue recognized upfront upon transfer of control at the time of electronic delivery. Revenue on per-incident repair and calibration services is recognized when services are performed. Over-time revenues are generated predominantly from the repair and calibration contracts, extended warranties, technical support for hardware and software, certain software subscription and Software as a Service (“SaaS”) product offerings, and professional services. Technical support for software and when-and-if available software updates and upgrades are sold either together with our software licenses and software subscriptions, including SaaS, or separately as part of our customer support programs.

Additionally, we provide custom solutions that include combinations of hardware, software, software subscriptions, installation, professional services, and other support services, and revenue may be recognized either up front upon delivery or over time depending upon the terms of the contract.

Contract Balances

Contract assets

Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to our customers. These amounts are primarily related to solutions and support arrangements when transfer of control has occurred but we have not yet invoiced. The contract assets balance was $91 million and $58 million as of July 31, 2024 and October 31, 2023, respectively, and is included in “accounts receivables, net” and “other assets” in the condensed consolidated balance sheet.

Contract costs

We capitalize direct and incremental costs incurred to acquire contracts for which the associated revenue is expected to be recognized in future periods. We have determined that certain employee and third-party representative commission programs meet the requirements to be capitalized. These costs are initially deferred and typically amortized over the term of the customer contract which corresponds to the period of benefit. Capitalized contract costs were $37 million and $43 million as of July 31, 2024 and October 31, 2023, respectively, and are included in “other current assets” and “other assets” in the condensed consolidated balance sheet. The amortization expense associated with these capitalized costs was $13 million and $43 million for the three and nine months ended July 31, 2024, respectively, and $13 million and $50 million for the corresponding periods last year.

Contract liabilities

Our contract liabilities consist of deferred revenue that arises when we receive consideration in advance of providing the goods or services promised in the contract. Contract liabilities are primarily generated from customer deposits received in

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advance of shipments for products or rendering of services and are recognized as revenue when products are shipped or services are provided to the customer. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue.

The following table provides a roll-forward of our contract liabilities, current and non-current:

	Nine Months Ended
	July 31, 2024
	(in millions)
Balance at October 31, 2023	$	757
Deferral of revenue billed in current period, net of recognition	440
Deferred revenue arising out of acquisitions	19
Revenue recognized that was deferred as of the beginning of the period	(475)
Foreign currency translation impact	3
Balance at July 31, 2024	$	744

Of the $475 million of revenue recognized in the nine months ended July 31, 2024 that was deferred as of the beginning of the period, approximately $105 million was recognized in the three months ended July 31, 2024.

Remaining Performance Obligations

Our remaining performance obligations, excluding contracts that have an original expected duration of one year or less, was approximately $570 million as of July 31, 2024, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. As of July 31, 2024, we expect to fulfill 16 percent of these remaining performance obligations during the remainder of 2024, 51 percent during 2025, and 33 percent thereafter.

4.    SHARE-BASED COMPENSATION

Keysight accounts for share-based awards in accordance with the provisions of the authoritative accounting guidance, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including restricted stock units (“RSUs”), employee stock purchases made under our Employee Stock Purchase Plan (“ESPP”), and performance share awards granted to selected members of our senior management under the Long-Term Performance (“LTP”) Program, based on estimated fair values. The impact of share-based compensation expense on the condensed consolidated statement of operations was as follows:

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023
	(in millions)
Cost of products and services	$	7	$	4	$	22	$	20
Research and development	8		8		30		31
Selling, general and administrative	17		15		66		60
Total share-based compensation expense	$	32	$	27	$	118	$	111

For the three and nine months ended July 31, 2024, the total share-based compensation expense includes $3 million and $9 million, respectively, of ESI Group acquisition-related compensation to redeem certain outstanding unvested stock awards as of the date of the acquisition that were determined to relate to post-merger service periods. Share-based compensation capitalized within inventory was $2 million as of July 31, 2024 and 2023.

5.    INCOME TAXES

The following table provides income tax details:

	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2024			2023			2024			2023
	(in millions, except percentages)
Income before taxes	$	213		$	389		$	617		$	1,081
Provision (benefit) for income taxes	$	(176)		$	101		$	(70)		$	250
Effective tax rate	(81.9)		%	25.8		%	(11.2)		%	23.1		%

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There was a tax benefit for the three and nine months ended July 31, 2024, as compared to the overall tax expense for the same periods last year, primarily due to one-time discrete tax benefits, as explained below, and a decrease in income before taxes in the current year.

The income tax benefit for the three and nine months ended July 31, 2024 included a net discrete benefit of $179 million and $178 million, respectively. The income tax expense for the three and nine months ended July 31, 2023 included a net discrete expense of $19 million and $21 million, respectively.

The discrete tax benefit for the three and nine months ended July 31, 2024 includes a $165 million benefit related to the deduction in the U.S. for intangible assets for purposes of determining income or loss under IRC § 951A(c). On June 14, 2019, the U.S. Department of the Treasury (“Treasury”) issued final regulations relating to Global Intangible Low Taxed Income (“GILTI”) under IRC § 951A (the “tax regulations”). The tax regulations contained language which disallowed GILTI tax deductions for intangible asset amortization resulting from the Singapore restructuring completed in 2018. During the quarter, the company concluded, in response to recent U.S. Supreme Court decisions on a number of relevant cases, the evolving global tax landscape and other changes in circumstances, that Treasury exceeded its regulatory authority and the intangible asset amortization should be deductible. The company amended its U.S. federal income tax returns for the open tax years to claim the deduction and recognized the discrete benefit in the condensed consolidated financial statements. The tax receivable resulting from the amended returns is reflected as “other assets” in the condensed consolidated balance sheet. The GILTI tax benefit for the fiscal year 2024 amortization is included in the annual effective tax rate, and the Singapore intangible assets will continue to be amortized for GILTI tax purposes until 2033.

The company believes the position meets the more likely than not recognition threshold. The company intends to vigorously defend its position. The outcome cannot be predicted with certainty. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.

The discrete tax benefit for the three and nine months ended July 31, 2024 also includes a $61 million benefit for the settlement of a Malaysia uncertain tax position. In the fourth quarter of fiscal year 2017, Keysight was assessed and paid income tax and penalties in Malaysia on gains related to the transfer of intellectual property rights. The company disputed this assessment and filed an appeal with the Court of Appeal in Malaysia. The Court of Appeal’s decision was rendered in Keysight’s favor on May 24, 2024, and the company received a refund of the income tax and penalties. At the time of the original assessment, the company had recorded a tax reserve for the assessed amount; the tax reserve was released as a result of the Court of Appeal decision.

Additionally, the income tax benefit for the three and nine months ended July 31, 2024 is offset by a discrete expense of $35 million due to a change in the potential U.S. benefit associated with the future resolution of non-U.S. tax reserves.

Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore and Malaysia. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment in those jurisdictions. The Malaysia tax incentive expires October 31, 2025. The Singapore tax incentive expired July 31, 2024. The expiration of the Singapore tax incentive in the current year has been reflected in the annual tax forecast. The impact of the tax incentives decreased the income tax provision by $35 million and $73 million for the nine months ended July 31, 2024 and 2023, respectively. The decrease in the tax benefit for the nine months ended July 31, 2024 is primarily due to a decrease in earnings taxed at incentive rates and the impact of the expiration of the Singapore tax incentive. The company is pursuing options to renew the Singapore tax incentive with retroactive effect to August 1, 2024.

The open tax years for the U.S. federal income tax return and most state income tax returns are from November 1, 2019 through the current tax year. For the majority of our non-U.S. entities, the open tax years are from November 1, 2018 through the current tax year.

At this time, management does not believe that the outcome of any future or currently ongoing examination will have a material impact on our consolidated financial statements. We believe that we have an adequate provision for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. Given the numerous tax years and matters that remain subject to examination in various tax jurisdictions, the ultimate resolution of current and future tax examinations could be inconsistent with management’s current expectations. If that were to occur, it could have an impact on our effective tax rate in the period in which such examinations are resolved.

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6.    NET INCOME PER SHARE

The following table presents the calculation of basic and diluted net income per share:

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023
	(in millions, except per-share amounts)
Net income	$	389	$	288	$	687	$	831
Basic weighted-average shares	174		178		174		178
Potential common shares	1		1		1		1
Diluted weighted-average shares	175		179		175		179
Net income per share - basic	$	2.23	$	1.62	$	3.94	$	4.66
Net income per share - diluted	$	2.22	$	1.61	$	3.92	$	4.63

Diluted shares outstanding primarily include the dilutive effect of non-vested awards and in-the-money options. The diluted effect of such awards is calculated based on the average share price of each period using the treasury stock method, except where the inclusion of such awards would have an anti-dilutive impact. Anti-dilutive shares excluded from the calculation of diluted earnings per share were immaterial for the three and nine months ended July 31, 2024 and 2023.

7.    GOODWILL AND OTHER INTANGIBLE ASSETS

The goodwill balance as of July 31, 2024 and October 31, 2023 and the activity for the nine months ended July 31, 2024 for each of our reportable operating segments were as follows:

	CSG		EISG		Total
	(in millions)
Goodwill at October 31, 2023	$	1,057	$	583	$	1,640
Foreign currency translation impact	3		5		8
Goodwill arising from acquisitions	185		558		743
Goodwill at July 31, 2024	$	1,245	$	1,146	$	2,391

There were no impairments for the three and nine months ended July 31, 2024 and 2023. As of July 31, 2024 and October 31, 2023, accumulated impairment losses on goodwill was $709 million.

Other intangible assets as of July 31, 2024 and October 31, 2023 consisted of the following:

	July 31, 2024						October 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Developed technology	$	1,367	$	1,000	$	367	$	1,033	$	949	$	84
Backlog	37		23		14		19		17		2
Trademark/Tradename	38		35		3		36		33		3
Customer relationships	587		387		200		406		340		66
Total amortizable intangible assets	$	2,029	$	1,445	$	584	$	1,494	$	1,339	$	155
In-Process R&D	53		—		53		—		—		—
Total	$	2,082	$	1,445	$	637	$	1,494	$	1,339	$	155

During the nine months ended July 31, 2024, we recognized additions to goodwill and other intangible assets of $743 million and $582 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed from the acquisition of ESI Group and other acquisition activity. See Note 2, “Acquisitions,” for additional information. During the nine months ended July 31, 2024, we transferred $7 million from in-process R&D to developed technology as projects were successfully completed.

Goodwill is assessed for impairment on a reporting unit basis at least annually in the fourth quarter of each year, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The company has not identified any triggering events that indicate an impairment of goodwill for the nine months ended July 31, 2024.

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During the nine months ended July 31, 2024, foreign exchange translation had a favorable impact of $6 million on other intangible assets. Amortization of other intangible assets was $31 million and $106 million, respectively, for the three and nine months ended July 31, 2024. Amortization of other intangible assets was $23 million and $71 million, respectively, for the three and nine months ended July 31, 2023.

Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:

	Amortization expense
	(in millions)
2024 (remainder)	$	32
2025	$	124
2026	$	111
2027	$	99
2028	$	96
2029	$	88
Thereafter	$	34

8.    FAIR VALUE MEASUREMENTS

The authoritative guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The guidance establishes a fair value hierarchy that prioritizes inputs used in valuation techniques into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in less active markets; or other inputs that can be derived principally from, or corroborated by, observable market data.

Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

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Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of July 31, 2024 and October 31, 2023 were as follows:

	Fair Value Measurements at
	July 31, 2024										October 31, 2023
	Total		Level 1		Level 2		Level 3		Other		Total		Level 1		Level 2		Level 3		Other
	(in millions)
Assets:
Short-term
Money market funds	$	989	$	989	$	—	$	—	$	—	$	1,934	$	1,934	$	—	$	—	$	—
Derivative instruments (foreign exchange contracts)	14		—		14		—		—		18		—		18		—		—
Long-term
Equity investments	78		78		—		—		—		56		56		—		—		—
Other investments	29		—		—		—		29		25		—		—		—		25
Total assets measured at fair value