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Table of Contents
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 APRIL 30, 2021
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)
Delaware46-4254555
(State or other jurisdiction of(IRS employer
incorporation or organization)Identification no.)
1400 Fountaingrove Parkway 
Santa RosaCalifornia95403
(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 classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareKEYSNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 May 24, 2021 was 184,225,986.


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TABLE OF CONTENTS
 
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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 EndedSix Months Ended
 April 30,April 30,
 2021202020212020
Revenue:  
Products$996 $708 $1,966 $1,610 
Services and other225 187 435 380 
Total revenue1,221 895 2,401 1,990 
Costs and expenses:
Cost of products389 303 781 662 
Cost of services and other95 76 176 157 
Total costs484 379 957 819 
Research and development209 166 408 353 
Selling, general and administrative297 251 598 551 
Other operating expense (income), net(4)(3)(9)(38)
Total costs and expenses986 793 1,954 1,685 
Income from operations235 102 447 305 
Interest income 4 1 10 
Interest expense(19)(20)(39)(39)
Other income (expense), net(8)22 (6)34 
Income before taxes208 108 403 310 
Provision for income taxes22 37 45 76 
Net income $186 $71 $358 $234 
Net income per share:  
Basic$1.01 $0.38 $1.93 $1.25 
Diluted$0.99 $0.37 $1.91 $1.23 
Weighted average shares used in computing net income per share:
Basic185 187 185 188 
Diluted187 189 188 190 

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 EndedSix Months Ended
 April 30,April 30,
 2021202020212020
Net income$186 $71 $358 $234 
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $(6), $3, $(11)and $2
22 (8)40 (7)
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero
 1  2 
Foreign currency translation, net of tax benefit (expense) of zero
(14)(7)17 (7)
Net defined benefit pension cost and post retirement plan costs:
Change in net actuarial loss, net of tax expense of $5, $4, $10, $4
17 11 31 28 
Change in net prior service credit, net of tax benefit of zero, zero, zero and $1
 (3) (5)
Other comprehensive income (loss)25 (6)88 11 
Total comprehensive income$211 $65 $446 $245 

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)

 April 30, 2021October 31, 2020
ASSETS  
Current assets:  
Cash and cash equivalents$1,993 $1,756 
Accounts receivable, net676 606 
Inventory774 757 
Other current assets275 255 
Total current assets3,718 3,374 
Property, plant and equipment, net598 595 
Operating lease right-of-use assets236 182 
Goodwill1,608 1,537 
Other intangible assets, net316 361 
Long-term investments65 61 
Long-term deferred tax assets712 740 
Other assets433 368 
Total assets$7,686 $7,218 
LIABILITIES AND EQUITY
Current liabilities:  
Accounts payable$248 $224 
Employee compensation and benefits359 289 
Deferred revenue488 391 
Income and other taxes payable82 64 
Operating lease liabilities42 43 
Other accrued liabilities69 70 
Total current liabilities1,288 1,081 
Long-term debt1,790 1,789 
Retirement and post-retirement benefits358 362 
Long-term deferred revenue172 175 
Long-term operating lease liabilities200 149 
Other long-term liabilities333 365 
Total liabilities4,141 3,921 
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; 197 million shares at April 30, 2021 and 196 million shares at October 31, 2020 issued
2 2 
Treasury stock at cost; 12.5 million shares at April 30, 2021 and 10.7 million shares at October 31, 2020
(992)(752)
Additional paid-in-capital2,152 2,110 
Retained earnings2,894 2,536 
Accumulated other comprehensive loss(511)(599)
Total stockholders' equity3,545 3,297 
Total liabilities and equity$7,686 $7,218 
    
 
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)
Six Months Ended
 April 30,
 20212020
Cash flows from operating activities:  
Net income$358 $234 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation 57 50 
Amortization115 109 
Share-based compensation64 54 
Deferred tax expense (benefit)(18)27 
Excess and obsolete inventory-related charges14 12 
Loss on settlement of pension plan16  
Gain on insurance proceeds received for damage to property, plant and equipment (32)
Other non-cash expense (income), net7 (10)
Changes in assets and liabilities:  
Accounts receivable(61)178 
Inventory(23)(63)
Accounts payable18 (67)
Employee compensation and benefits51 (36)
Deferred revenue89 51 
Income taxes payable7 1 
Retirement and post-retirement benefits4 (6)
Other assets and liabilities(1)(7)
Net cash provided by operating activities697 495 
Cash flows from investing activities:  
Investments in property, plant and equipment(61)(55)
Acquisition of businesses and intangible assets, net of cash acquired(136)(5)
Insurance proceeds received for damage to property, plant and equipment 32 
Net cash used in investing activities(197)(28)
Cash flows from financing activities:  
Proceeds from issuance of common stock under employee stock plans29 26 
Payment of taxes related to net share settlement of equity awards(51)(50)
Treasury stock repurchases(240)(196)
Payment of acquisition-related contingent consideration(2) 
Net cash used in financing activities(264)(220)
Effect of exchange rate movements6 (4)
Net increase in cash, cash equivalents, and restricted cash242 243 
Cash, cash equivalents, and restricted cash at beginning of period1,767 1,600 
Cash, cash equivalents, and restricted cash at end of period$2,009 $1,843 
Supplemental cash flow information:
Interest payments$37 $38 
Income tax paid, net$55 $47 

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 StockTreasury Stock  
 Number of SharesPar ValueAdditional Paid-in CapitalNumber of SharesTreasury Stock at CostRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders' Equity
Balance as of January 31, 2021196,854 $2 $2,134 (10,869)$(772)$2,708 $(536)$3,536 
Net income— — — — — 186 — 186 
Other comprehensive income, net of tax— — — — — — 25 25 
Issuance of common stock47 — 1 — — — — 1 
Taxes related to net share settlement of equity awards— — (2)— — — — (2)
Share-based compensation— — 19 — — — — 19 
Repurchase of common stock— — — (1,592)(220)— — (220)
Balance as of April 30, 2021196,901 $2 $2,152 (12,461)$(992)$2,894 $(511)$3,545 
Balance as of October 31, 2020195,661 $2 $2,110 (10,732)$(752)$2,536 $(599)$3,297 
Net income— — — — — 358 — 358 
Other comprehensive income, net of tax— — — — — — 88 88 
Issuance of common stock1,240 — 29 — — — — 29 
Taxes related to net share settlement of equity awards— — (51)— — — — (51)
Share-based compensation— — 64 — — — — 64 
Repurchase of common stock— — — (1,729)(240)— — (240)
Balance as of April 30, 2021196,901 $2 $2,152 (12,461)$(992)$2,894 $(511)$3,545 
Balance as of January 31, 2020195,039 $2 $2,031 (7,190)$(417)$2,072 $(561)$3,127 
Net income— — — — — 71 — 71 
Other comprehensive loss, net of tax— — — — — — (6)(6)
Issuance of common stock68 —  — — — —  
Taxes related to net share settlement of equity awards— — (1)— — — — (1)
Share-based compensation— — 14 — — — — 14 
Repurchase of common stock— — — (1,315)(120)— — (120)
Balance as of April 30, 2020195,107 $2 $2,044 (8,505)$(537)$2,143 $(567)$3,085 
Balance as of October 31, 2019193,769 $2 $2,013 (6,458)$(342)$1,909 $(578)$3,004 
Net income— — — — — 234 — 234 
Other comprehensive income, net of tax— — — — — — 11 11 
Issuance of common stock1,338 — 26 — — — — 26 
Taxes related to net share settlement of equity awards— — (50)— — — — (50)
Share-based compensation— — 55 — — — — 55 
Repurchase of common stock— — — (2,047)(195)— — (195)
Balance as of April 30, 2020195,107 $2 $2,044 (8,505)$(537)$2,143 $(567)$3,085 

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 technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.
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 April 30, 2021 and October 31, 2020, our results of operations for the three and six months ended April 30, 2021 and 2020 and cash flows for the six months ended April 30, 2021 and 2020.
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, 2020.
New Accounting Pronouncements. Accounting standard updates during the first six months of fiscal 2021 that have been issued by the Financial Accounting Standards Board (“FASB”) or other standards-setting bodies are not material to our condensed consolidated financial statements. Other amendments to GAAP that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.
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2.    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, Communications Solutions Group ("CSG") and Electronics Industrial Solutions Group ("EISG").
Three Months Ended
April 30,
20212020
CSGEISGTotalCSGEISGTotal
 (in millions)
Region
Americas$409 $75 $484 $286 $44 $330 
Europe126 73 199 92 54 146 
Asia Pacific342 196 538 275 144 419 
Total revenue$877 $344 $1,221 $653 $242 $895 
End Market
Aerospace, Defense & Government$271 $ $271 $185 $ $185 
Commercial Communications606  606 468  468 
Electronic Industrial 344 344  242 242 
Total revenue$877 $344 $1,221 $653 $242 $895 
Timing of Revenue Recognition
Revenue recognized at a point in
time
$731 $301 $1,032 $507 $200 $707 
Revenue recognized over time146 43 189 146 42 188 
Total revenue$877 $344 $1,221 $653 $242 $895 
Six Months Ended
April 30,
20212020
CSGEISGTotalCSGEISGTotal
 (in millions)
Region
Americas$810 $142 $952 $672 $105 777 
Europe258 143 401 207 125 332 
Asia Pacific661 387 1,048 592 289 881 
Total net revenue$1,729 $672 $2,401 $1,471 $519 $1,990 
End Market
Aerospace, Defense & Government$565 $ $565 $430 $ 430 
Commercial Communications1,164  1,164 1,041  1,041 
Electronic Industrial 672 672  519 519 
Total net revenue$1,729 $672 $2,401 $1,471 $519 $1,990 
Timing of Revenue Recognition
Revenue recognized at a point in time$1,443 $585 $2,028 $1,208 $450 $1,658 
Revenue recognized over time286 87 373 263 69 332 
Total net revenue$1,729 $672 $2,401 $1,471 $519 $1,990 
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
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revenue in this category represents revenue recognized up front upon transfer of control at the time of electronic delivery. Revenue on per-incident repair and calibration services is recognized as 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 on 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 software and service arrangements where transfer of control has occurred but we have not yet invoiced. The contract assets balance was $59 million and $61 million at April 30, 2021 and October 31, 2020, respectively, and is included in "accounts receivables, net" in our 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 commissions 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 $35 million and $31 million as of April 30, 2021 and October 31, 2020, respectively, and are included in “other current assets” and “other assets” in the condensed consolidated balance sheet. The amortization expense associated with these costs was $20 million and $38 million for the three and six months ended April 30, 2021, respectively, and $17 million and $33 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 advance of shipments for products or rendering of services and are recognized as revenue when 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. Contract liabilities are recognized as revenue when services are provided to the customer.
The following table provides a roll-forward of our contract liabilities, current and non-current:
Six Months Ended
April 30,
2021
(in millions)
Balance at October 31$566 
Deferred revenue arising out of acquisitions2 
Deferral of revenue billed in current period, net of recognition355 
Revenue recognized that was deferred as of the beginning of the period(266)
Foreign currency translation impact3 
Balance at April 30$660 
Of the $266 million of revenue recognized in the six months ended April 30, 2021 that was deferred as of the beginning of the period, approximately $102 million was recognized in the three months ended April 30, 2021.
Remaining Performance Obligations
Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, was approximately $354 million as of April 30, 2021, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. Since we typically invoice customers at contract inception, this amount is included in our current and long-term deferred revenue balances. As of April 30, 2021, we expect to recognize 28% of the revenue related to these unsatisfied performance obligations during the remainder of 2021, 40% during 2022, and 32% thereafter.
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3.    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”), employee stock option awards, 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 our condensed consolidated statement of operations was as follows:
Three Months EndedSix Months Ended
April 30,April 30,
 2021202020212020
 (in millions)
Cost of products and services$6 $4 $13 $9 
Research and development4 3 13 11 
Selling, general and administrative12 8 39 34 
Total share-based compensation expense$22 $15 $65 $54 

4.    INCOME TAXES
The following table provides details of income taxes (in millions, except percentages):
Three Months EndedSix Months Ended
April 30,April 30,
 2021202020212020
 (in millions)
Income before taxes$208 $108 $403 $