Keysight Technologies, Inc.
CEO : Mr. Satish C. Dhanasekaran
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2024 Q4 | -99.4% YoY | -100.0% | -132.8% | 2024-11-19 |
Satish Dhanasekaran says,
Quarterly Financial Performance
- Revenue and Earnings Exceeded Expectations: Fourth quarter revenue and earnings per share surpassed the high-end of the guidance range.
- Orders grew by 1% year-over-year and 8% sequentially, indicating strong end-of-year bookings, particularly in AI and US Aerospace, Defense, and Government sectors.
- Full-year revenue reached $5 billion, with earnings per share at $6.27, showcasing a gradual recovery in the second half of the year.
Operational Highlights and Segment Performance
- Communications Solutions Group saw flat year-over-year revenue growth but improved 6% sequentially, driven by steady demand in AI and advancements in high-speed interconnects and wireless technologies.
- Aerospace, Defense, and Government sectors reached all-time high orders due to robust seasonal demand and expected increases in defense budgets.
- Electronic Industrial Solutions Group experienced a year-over-year revenue decline but a mid-single-digit sequential growth, with strong demand in semiconductors offset by automotive market challenges.
Strategic Growth and Innovation
- Progress in software-centric solutions, with significant investments in innovation and industry collaborations, along with selective mergers and acquisitions.
- Showcased major technological advancements at industry conferences, emphasizing AI model training, 800 gig interoperability, and advanced defense communications.
- Focus on semiconductor demand and automotive innovations for future growth, despite near-term market headwinds.
Software and Services Initiatives
- Software and Services revenue increased by 8% this quarter, now comprising 39% of total revenue.
- Annual recurring revenue from these segments grew 16% to approximately $1.5 billion, representing 30% of overall revenue.
- Expanded virtual prototyping and design engineering software led to solid growth, exemplifying Keysight’s commitment to innovation and customer engagement.
Future Outlook and Strategic Direction
- Confidence in Outperformance: Keysight remains optimistic about outperforming markets as they recover, supported by a differentiated portfolio and rapid technology innovation.
- Continued focus on returning value to shareholders, with 50% of free cash flow allocated to repurchases this year.
- Commitment to maintaining a flexible and disciplined operating model to deliver strong financial results across varied economic conditions.
Neil Dougherty says,
Q4 2024 Financial Performance
- Fourth quarter revenue was reported at $1,287 million, exceeding the high-end of the guidance range, despite a decrease of 2% year-over-year and 5% on a core basis.
- Orders amounted to $1,345 million, representing a 1% increase as reported, but a 1% decrease on a core basis.
- Backlog increased by $53 million, closing at a total of $2.4 billion.
- Gross margin for the quarter stood at 64.5%, while operating expenses rose by 5% to $497 million.
- Operating margin was reported at 26% or 28% on a core basis.
Annual Financial Overview
- Full-year revenue was recorded at $4,979 million, marking a decline of 9% or 12% on a core basis.
- The company sustained R&D investment at $871 million, accounting for 17.5% of revenue.
- Full-year core operating margin dropped 370 basis points to 26.5%, yet it outperformed the company’s down cycle model.
- Net income for the year amounted to $1.1 billion, translating to earnings per share of $6.27.
Segment Performance
- Communications Solutions Group (CSG):
- Q4 revenue was $894 million, flat as reported, down 2% on a core basis.
- Commercial Communications revenue increased by 4% to $591 million, while Aerospace, Defense and Government revenue decreased by 6% to $303 million.
- CSG gross margin was 67%, with an operating margin of 28%.
- Electronic Industrial Solutions Group (EISG):
- Revenue decreased by 6% to $393 million, down 11% on a core basis.
- Reported gross margin of 58% and an operating margin of 21%, up approximately 100 basis points from the prior quarter.
Cash Flow and Share Repurchases
- The quarter ended with $1.8 billion in cash and cash equivalents.
- Generated cash flow from operations was $359 million, with a free cash flow of $328 million.
- Share repurchases totaled 974,000 shares at an average price of $154 per share, summing to a total of $150 million.
- For the full year, $439 million was spent on share repurchases, covering 49% of the $905 million in free cash flow.
Guidance for FY 2025
- Expected revenue growth at the low end of the 5% to 7% long-term target and earnings growth to align with a 10% target.
- First quarter revenue projected between $1,265 million to $1,285 million, with EPS anticipated in the range of $1.65 to $1.71.
- Annual interest expense estimated at approximately $70 million, with capital expenditures around $150 million.
- Modeling a non-GAAP effective tax rate of 14% for FY 2025.
Q & A sessions,
Wireline Business and AI-Driven Growth
- The wireline business has gained significant momentum due to AI-related advancements, surpassing $1 billion in orders this year.
- The growth rate for wireline orders is in the double digits, driven by a concentrated set of customers in the hyperscaler segment.
- Investments are being made to alleviate supply chain constraints to enable scaling in response to increased AI infrastructure upgrades.
- Forums such as OCP and ECOC indicate expanding scale in computing, power, thermal management, and networking technologies.
Semiconductor Sector Insights
- Strength in wafer test solutions for silicon photonics and new memory topologies has been noted.
- Despite reported slowdowns among semiconductor equipment manufacturers, the semiconductor segment is expected to grow, contributing approximately 10% of total company revenue.
- Overall growth in the semiconductor sector remains optimistic, although timing for a full recovery is uncertain.
General Electronics and Research Spending
- Q4 showed stability in manufacturing, leading to underlying strength in research spending for next-generation technologies.
- The increase in new customer logos has helped return the electronics segment to growth, though this is based on only one quarter of data.
- There is cautious optimism that EISG could return to order growth within the year, though timing is still uncertain.
Aerospace, Defense, and Automotive Market Dynamics
- Q4 results exceeded expectations, with notable strength in the Aerospace and Defense sector.
- A significant pullback in EV development spending is impacting the automotive industry.
- Wireline market shows stability, but wireless is not yet a strong growth catalyst.
- Momentum in Aerospace and Defense is expected to continue.
Macro Perspective and Industrial Markets
- The automotive market faces challenges due to reduced EV development spending.
- There is optimism for a turnaround in the semiconductor market, although the exact timing remains uncertain.
- Industrial markets face uncertainties tied to the absorption of previously added capacity.
| Sector | Current State | Outlook |
|---|---|---|
| Wireline | Strong double-digit growth driven by AI | Continued investment to address supply chain constraints |
| Semiconductor | Growth in wafer test solutions despite some slowdowns | Continued growth expected; semis contribute 10% of revenue |
| Automotive | Pressure from EV development pullback | Challenging outlook due to reduced spending |
| General Electronics | Q4 growth from manufacturing stability | Potential return to order growth this year |
No bad stock 