Keysight Technologies (KEYS) Q4 2024 earnings summary

Executive summary

• Q4 revenue and EPS exceeded the high end of guidance, with orders up 1% year-over-year and 8% sequentially, driven by AI and strong U.S. Aerospace, Defense, and Government bookings.

• Full-year revenue reached $4.98 billion and non-GAAP EPS $6.27, both down from 2023 record highs, but with improved performance in the second half.

• Software and services revenue grew 8% in Q4, now representing 39% of total revenue, with recurring revenue up to 30% of total, an increase of ~600bps year-over-year.

• Completed four acquisitions in FY24 and entered agreements to acquire Spirent Communications and Synopsys' Optical Solutions Group.

• GAAP net loss for Q4 was $73 million due to a $315 million tax expense from a new Singapore tax incentive; fiscal year GAAP net income was $614 million.

Financial highlights

• Q4 revenue: $1.287 billion (down 2% YoY, down 5% core); Q4 non-GAAP EPS: $1.65; Q4 non-GAAP net income: $288 million.

• Full-year revenue: $4.979 billion (down 9% YoY, down 12% core); full-year non-GAAP net income: $1.1 billion; non-GAAP EPS: $6.27.

• Free cash flow for FY24 was $905 million, representing 18% of revenue; cash and equivalents at year-end totaled $1.8 billion.

• Q4 operating margin: 26% (28% core); Q4 gross margin: 64.5%; FY24 non-GAAP gross margin: 65.2%.

• SG&A expenses declined 7% for the year, excluding acquisitions; R&D investment was $871 million (17.5% of revenue).

Outlook and guidance

• Q1 FY25 revenue guidance: $1.265–$1.285 billion; Q1 non-GAAP EPS: $1.65–$1.71.

• FY25 revenue growth expected at the low end of the 5%-7% long-term target; EPS growth in line with 10% target.

• Annual interest expense projected at $70 million; capital expenditures at $150 million; non-GAAP tax rate at 14%.

• ESI revenue to be front-loaded in Q1 due to annual contract renewals, with a sequential decrease in Q2.