Keysight Technologies Inc

Previous wording

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. This report contains forward-looking statements which include but are not limited to predictions, future guidance, projections, beliefs, and expectations about the company’s trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of government regulations on our ability to conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our completed acquisitions and other transactions, and our transition to lower-cost regions. The forward-looking statements 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, the impact of global economic conditions such as inflation or potential recession, slowing demand for products or services, volatility in financial markets, reduced access to credit, increased interest rates, the existence of political or economic instability, impacts of geopolitical tension and conflict in regions outside of the U.S., the impacts of increased trade tension and tightening of export control regulations, the impact of compliance with the August 3, 2021 Consent Agreement with the Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, Department of State, the impact of new and ongoing litigation, impacts related to endemic and pandemic conditions, impacts related to net zero emissions commitments, and the impact of volatile weather caused by environmental conditions such as climate change. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Current wording

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. This report contains forward-looking statements which include but are not limited to predictions, future guidance, projections, beliefs, and expectations about the company’s trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of government regulations on our ability to conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our completed acquisitions and other transactions, and our transition to lower-cost regions. The forward-looking statements 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, the impact of global economic conditions such as inflation or potential recession, slowing demand for products or services, volatility in financial markets, reduced access to credit, increased interest rates, the existence of political or economic instability, impacts of geopolitical tension and conflict in regions outside of the U.S., the impacts of increased trade tension and tightening of export control regulations, the impact of new and ongoing litigation, impacts related to endemic and pandemic conditions, impacts related to net zero emissions commitments, and the impact of volatile weather caused by environmental conditions such as climate change. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Previous wording

In the first quarter of fiscal 2024, we acquired all of the outstanding common stock of ESI Group SA (" ESI Group") for $935 million, net of cash acquired, using existing cash. For the three months ended January 31, 2024, our acquisition of ESI Group resulted in incremental revenue of $68 million. In our discussion of changes in our results of operations, we have qualitatively disclosed the impact of ESI Group acquisition. See Note 2, "Acquisitions," for additional information.

Current wording

In the first quarter of fiscal 2024, we acquired all of the outstanding common stock of ESI Group SA ("ESI Group") for $935 million, net of cash acquired, using existing cash. For the three and six months ended April 30, 2024, our acquisition of ESI Group resulted in incremental revenue of $26 million and $94 million, respectively. In our discussion of changes in our results of operations, we have qualitatively disclosed the impact of ESI Group acquisition. See Note 2, "Acquisitions," for additional information.

Previous wording

Our global operations continue to be affected by many external headwinds, including inflationary pressures, rising interest rates, currency movements, increased geopolitical tensions and trade restrictions. These headwinds are also negatively impacting our customers' operations and financial performance. As a result, demand has declined year-over-year as our customers are exercising caution and adapting to the post-pandemic industry dynamics. As we work through these near-term headwinds, we are exercising our financial playbook and the structural flexibility in our operating model to continue delivering strong financial results. Keysight’s technology leadership, differentiated first-to-market solutions portfolio, durable and resilient business model driven by the strength of the Keysight Leadership Model, and continued customer engagement in new technology innovation spanning diverse applications across global markets provides us confidence in our ability to weather these macro and industry dynamics and deliver consistent long-term value to our customers.

Current wording

Our global operations continued to be affected by many external headwinds, including increased interest rates, currency movements, inflationary pressures, increased geopolitical tensions and trade restrictions. These headwinds are also negatively impacting our customers' operations and financial performance. As a result, demand has declined year-over-year as our customers are exercising caution and adapting to the current macro-economic headwinds. As we work through these near-term headwinds, we remained operationally disciplined by exercising our financial playbook and the structural flexibility in our operating model, while investing to expand our differentiated solutions portfolio and deepening our customer relationships. Consistent with the Keysight Leadership Model, our differentiated first-to-market solutions portfolio, technology leadership, customer relationships, and durable and resilient business model gives us confidence in the long-term trajectory of the business and our ability to outperform in a variety of market conditions and deliver consistent long-term value to our customers.

Previous wording

Total orders for the three months ended January 31, 2024 were $1,220 million, a decrease of 6 percent compared to the same period last year. Acquisitions had a favorable impact of 6 percentage points on the year-over-year order change. Foreign currency movements had an immaterial impact on the year-over-year order change. For the three months ended January 31, 2024, orders declined double-digits in Asia Pacific, partially offset by an increase in Europe and the Americas.

Current wording

Total orders for the three and six months ended April 30, 2024 were $1,219 million and $2,439 million, respectively, a decrease of 8 percent and 7 percent, respectively, compared to the same periods last year. Acquisitions had a favorable impact of 3 percentage points and 4 percentage points, respectively, on the year-over-year order change for the three and six months ended April 30, 2024. Foreign currency movements had an unfavorable impact of 1 percentage point and immaterial impact, respectively, on the year-over-year order change for the three and six months ended April 30, 2024. For the three months ended April 30, 2024, orders declined across all regions. For the six months ended April 30, 2024, orders declined in Asia Pacific and the Americas, partially offset by an increase in Europe.

Previous wording

Revenue for the three months ended January 31, 2024 was $1,259 million, a decrease of 9 percent compared to the same period last year. Revenue associated with acquisitions had a favorable impact of 5 percentage points on the year-over-year revenue change. Foreign currency movements had an immaterial impact on the year-over-year revenue change. Revenue for the Communications Solutions Group and Electronic Industrial Solutions Group declined year-over-year and represented 67 percent and 33 percent, respectively, of total revenue for the three months ended January 31, 2024.

Current wording

Revenue for the three and six months ended April 30, 2024 was $1,216 million and $2,475 million, respectively, a decrease of 13 percent and 11 percent, respectively, compared to the same periods last year. Revenue associated with acquisitions had a favorable impact of 2 percentage points and 4 percentage points, respectively, on the year-over-year revenue change for the three and six months ended April 30, 2024. Foreign currency movements had an unfavorable impact of 1 percentage point on the year-over-year revenue change for the three and six months ended April 30, 2024. For the three and six months ended April 30, 2024, revenue for both the Communications Solutions Group and Electronic Industrial Solutions Group declined year-over-year. Revenue from the Communications Solutions Group and the Electronic Industrial Solutions Group represented 69 percent and 31 percent, respectively, of total revenue for the three months ended April 30, 2024. Revenue from the Communications Solutions Group and the Electronic Industrial Solutions Group represented 68 percent and 32 percent, respectively, of total revenue for the six months ended April 30, 2024.

Previous wording

Net income for the three months ended January 31, 2024 was $172 million, compared to $260 million for the same period last year. The decrease in net income for the three months ended January 31, 2024 was primarily driven by lower revenue, higher restructuring costs, amortization of acquisition-related balances, and incremental operating expenses due to the ESI Group acquisition, partially offset by incremental gross margin impact due to the ESI Group acquisition, favorable mix and lower variable people-related costs.

Current wording

Net income for the three and six months ended April 30, 2024 was $126 million and $298 million, respectively, compared to $283 million and $543 million for the same periods last year. The decrease in net income for the three months ended April 30, 2024 was primarily driven by lower revenue, higher acquisition and integration costs and higher amortization of acquisition-related balances, partially offset by lower provision for income taxes and lower people-related costs. The decrease in net income for the six months ended April 30, 2024 was primarily driven by lower revenue, higher acquisition and integration costs, restructuring costs and amortization of acquisition-related balances, partially offset by lower provision of income taxes, incremental gross margin impact from the ESI Group acquisition and lower people-related costs.

Previous wording

Our first-to-market solutions strategy enables customers to develop new technologies and accelerate innovation and provides a platform for Keysight's long-term growth. Our customers are expected to continue to make R&D investments in certain next-generation technologies, including 5G, early 6G, high-speed data centers, satellite networks and Artificial Intelligence-Machine Learning ("AI-ML") network modeling, new automotive mobility technologies, industrial internet of things ("IoT"), and defense modernization. We continue to engage actively with our customers, and closely monitor the current macroeconomic environment, including trade, tariffs, monetary and fiscal policies and geopolitical tensions. Despite the near-term challenges, we remain confident in the long-term secular growth trends of our markets and our ability to outperform in a variety of market conditions.

Current wording

Our first-to-market solutions strategy enables customers to develop new technologies and accelerate innovation and provides a platform for Keysight's long-term growth. Our customers are expected to continue to make R&D investments in certain next-generation technologies and applications, including evolution of 5G, early 6G, high-speed data center networks and infrastructure, satellite networks and Artificial Intelligence ("AI"), next generation electric vehicles ("EV") and autonomous vehicles ("AV"), industrial internet of things ("IoT"), and defense modernization. We continue to engage actively with our customers, and closely monitor the current macroeconomic environment, including trade, tariffs, monetary and fiscal policies and geopolitical tensions. Despite the near-term challenges, we remain confident in the long-term secular growth trends of our markets and our ability to outperform in a variety of market conditions.

Previous wording

There were no material changes during the three months ended January 31, 2024 to the critical accounting estimates described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

Current wording

There were no material changes during the three and six months ended April 30, 2024 to the critical accounting estimates described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

Previous wording

Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities. We hedge revenues, expenses and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short-term and anticipated basis. The result of the hedging has been included in our condensed consolidated balance sheet and statement of operations. We experience some fluctuations within individual lines of the condensed consolidated balance sheet and condensed consolidated statement of operations because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. Our hedging program is designed to hedge short-term currency movements based on a rolling period of up to twelve months. Therefore, we are exposed to currency fluctuations over the longer term. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

Current wording

Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities. We hedge revenues, expenses and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short-term and anticipated basis. The result of the hedging has been included in the condensed consolidated balance sheet and statement of operations. We experience some fluctuations within individual lines of the condensed consolidated balance sheet and condensed consolidated statement of operations because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. Our hedging program is designed to hedge short-term currency movements based on a rolling period of up to twelve months. Therefore, we are exposed to currency fluctuations over the longer term. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

Previous wording

Results from Operations - Three months ended January 31, 2024 and 2023

Current wording

Results from Operations - Three and six months ended April 30, 2024 and 2023

Previous wording

A summary of our results is as follows:

Current wording

A summary of our results i s as follows:

Previous wording

The following table provides the percent change in revenue for the three months ended January 31, 2024 by geographic region and the impact of foreign currency movements as compared to the same period last year.

Current wording

The following table provides the percent change in revenue for the three and six months ended April 30, 2024 by geographic region and the impact of foreign currency movements as compared to the same period last year.

Previous wording

R&D expense for the three months ended January 31, 2024 increased 2 percent compared to the same period last year, primarily driven by incremental costs due to the ESI Group acquisition, and higher restructuring costs, partially offset by lower variable people-related costs. As a percentage of revenue, R&D expense was 18 percent for the three months ended January 31, 2024. We continue to invest in key growth opportunities in our end markets and leading-edge technologies.

Current wording

R&D expense for the three months ended April 30, 2024 increased 3 percent compared to the same period last year, primarily driven by incremental costs from the ESI Group acquisition. R&D expense for the six months ended April 30, 2024 increased 3 percent compared to the same period last year, primarily driven by incremental costs from the ESI Group acquisition, partially offset by lower variable people-related costs. As a percentage of revenue, R&D expense was 19 percent for the three and six months ended April 30, 2024. We continue to prioritize investment in key growth opportunities in our end markets and leading-edge technologies.

Previous wording

Selling, general and administrative expense for the three months ended January 31, 2024 increased 7 percent compared to the same period last year, primarily driven by incremental costs due to the ESI Group acquisition, higher restructuring costs and amortization of acquisition-related balances, partially offset by lower variable people-related costs and infrastructure costs.

Current wording

Selling, general and administrative expense for the three months ended April 30, 2024 increased 7 percent compared to the same period last year, primarily driven by higher acquisition and integration costs, incremental costs from the ESI Group acquisition and higher amortization of acquisition-related balances, partially offset by lower people-related costs and marketing costs. Selling, general and administrative expense for the six months ended April 30, 2024 increased 7 percent compared to the same period last year, primarily driven by higher acquisition and integration costs, incremental costs from the ESI Group acquisition, higher amortization of acquisition-related balances and higher restructuring costs, partially offset by lower people-related and infrastructure costs.

Previous wording

Other operating expense (income), net for the three months ended January 31, 2024 was income of $2 million compared to income of $4 million for the same period last year.

Current wording

Other operating expense (income), net for the three and six months ended April 30, 2024 was income of $3 million and $5 million, respectively, compared to income of $4 million and $8 million, respectively, for the same periods last year.

Previous wording

Interest income for the three months ended January 31, 2024 was $23 million compared to $19 million for the same period last year and primarily relates to interest earned on our cash balances. Interest expense for the three months ended January 31, 2024 was $20 million as compared to $19 million for the same period last year and primarily relates to interest on our senior notes.

Current wording

Interest income for the three and six months ended April 30, 2024 was $18 million and $41 million, respectively, compared to $22 million and $41 million, respectively, for the same periods last year and primarily relates to interest earned on our cash balances. Interest expense for the three and six months ended April 30, 2024 was $20 million and $40 million, respectively, compared to $20 million and $39 million, respectively, for the same periods last year and primarily relates to interest on our senior notes.

Previous wording

Other income (expense), net for the three months ended January 31, 2024 was income of $5 million compared to income of $9 million for the same period last year and primarily includes income related to our defined benefit and post-retirement benefit plans, the change in fair value of our equity and other investments, currency impacts, and income attributable to non-controlling interests.

Current wording

Other income (expense), net for the three and six months ended April 30, 2024 was zero and income of $5 million, respectively, compared to income of $5 million and $14 million, respectively, for the same periods last year and primarily includes income related to our defined benefit and post-retirement benefit plans, the change in fair value of our equity and other investments, currency impacts, and income attributable to non-controlling interests. The decrease in other income (expense), net for the three and six months ended April 30, 2024 is primarily driven by net currency losses.

Previous wording

As of January 31, 2024, our headcount was approximately 15,500 compared to approximately 15,000 at January 31, 2023. The increase was primarily driven by the acquisition of ESI Group partially offset by reductions due to the impact of our cost reduction measures.

Current wording

As of April 30, 2024, our headcount was approximately 15,400 compared to approximately 15,000 at April 30, 2023. The increase was primarily driven by the acquisition of ESI Group partially offset by reductions from our cost efficiency measures.

Previous wording

The tax expense for the three months ended January 31, 2024 was lower compared to the same period last year primarily due to a decrease in income before taxes, partially offset by an increase in discrete tax expense. The decrease in income before taxes in jurisdictions with tax rates lower than the U.S. statutory rate caused an increase in the overall effective tax rate for the three months ended January 31, 2024 as compared to the same period last year.

Current wording

The tax expense for the three and six months ended April 30, 2024 was lower compared to the same periods last year primarily due to a decrease in income before taxes. The decrease in income before taxes in jurisdictions with tax rates lower than the U.S. statutory rate, without a proportional decline in the U.S. taxes on non-U.S. earnings, resulted in an increase in the overall effective tax rate for the three and six months ended April 30, 2024 as compared to the same periods last year.

Previous wording

The income tax expense for the three months ended January 31, 2024 included a net discrete expense of $2 million. The income tax expense for the three months ended January 31, 2023 included a net discrete benefit of $1 million. The increase in discrete tax expense for the three months ended January 31, 2024 was primarily due to a decrease in tax deductions related to stock compensation.

Current wording

The income tax expense for the three and six months ended April 30, 2024 included a net discrete benefit of $1 million and net discrete expense of $1 million, respectively. The income tax expense for the three and six months ended April 30, 2023 included a net discrete expense of $3 million and $2 million, respectively.

Previous wording

Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore and Malaysia, that will expire at various times in the future. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment in those jurisdictions. The Singapore tax incentive will expire July 31, 2024, and the Malaysia tax incentive will expire October 31, 2025. 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 $13 million and $25 million for the three months ended January 31, 2024 and 2023, respectively. The decrease in the tax benefit for the three months ended January 31, 2024 is primarily due to a decrease in earnings taxed at incentive rates and the impact of the Singapore tax incentive expiration on the forecasted annual effective tax rate.

Current wording

Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore and Malaysia, that will expire at various times in the future. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment in those jurisdictions. The Singapore tax incentive will expire July 31, 2024, and the Malaysia tax incentive will expire October 31, 2025. 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 $22 million and $49 million for the six months ended April 30, 2024 and 2023, respectively. The decrease in the tax benefit for the six months ended April 30, 2024 is primarily due to a decrease in earnings taxed at incentive rates and the impact of the Singapore tax incentive expiration.

Previous wording

The company is being audited in Malaysia for fiscal year 2008. This tax year pre-dates our separation from Agilent. However, pursuant to the agreement between Agilent and Keysight pertaining to tax matters, as finalized at the time of separation, for certain entities, including Malaysia, any historical tax liability is the responsibility of Keysight. In the fourth quarter of fiscal year 2017, Keysight paid income taxes and penalties of $68 million on gains related to intellectual property rights. The company believes there are strong technical defenses to the current assessment; the statute of limitations for the fiscal year 2008 in Malaysia was closed, and the income in question is exempt from tax in Malaysia. The company is disputing this assessment and pursuing all available recourses to resolve this issue favorably for the company. Our appeals to both the Special Commissioners of Income Tax and the High Court in Malaysia have been unsuccessful. The decision from the Court of Appeal, which was previously expected to be rendered in February 2024, is now expected to be rendered in May 2024. There are limited further legal options available after the decision is returned from the Court of Appeal.

Current wording

The company was audited in Malaysia for fiscal year 2008. This tax year predates our separation from Agilent. However, pursuant to the agreement between Agilent and Keysight pertaining to tax matters, as finalized at the time of separation, for certain entities, including Malaysia, any historical tax liability is the responsibility of Keysight. In the fourth quarter of fiscal year 2017, Keysight paid income taxes and penalties of $68 million on gains related to 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.

Previous wording

The Communications Solutions Group ("CSG") serves customers spanning the global commercial communications and aerospace, defense, and government end markets. The group’s solutions consist of electronic design and test software, instrumentation, systems, and related services. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of communication systems in wireless, wireline, enterprise, and aerospace, defense and government end markets. In addition, the group provides automated software test solutions that include AI-ML to automatically identify, build, and execute tests critical to digital business success and a strong customer experience.

Current wording

The Communications Solutions Group ("CSG") serves customers spanning the global commercial communications and aerospace, defense, and government end markets. The group’s solutions consist of electronic design and test software, instrumentation, systems, and related services. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of communication systems in wireless, wireline, enterprise, and aerospace, defense and government end markets. In addition, the group provides automated software test solutions to automatically identify, build, and execute tests critical to digital business success and a strong customer experience.

Previous wording

The Communications Solutions Group revenue for the three months ended January 31, 2024 decreased 11 percent compared to the same period last year. Revenues associated with acquisitions had a favorable impact of 1 percentage point on the year-over-year revenue change. Foreign currency movements had an immaterial impact on the year-over-year revenue change. Revenue declined across all regions and in both the commercial communications and the aerospace, defense, and government end markets. The Communications Solutions Group revenue for the three months ended January 31, 2024 declined relative to a strong compare last year, which was driven by robust backlog conversion. Our R&D engagements with customers remained strong and we continue to see investments to support development of new communications technologies (e.g., 5G/6G, Open RAN, commercial satellite non-terrestrial networks, quantum), artificial intelligence ("AI")-driven data center expansion, 400G/800G/terabit, high speed networking and major defense and government programs worldwide.

Current wording

The Communications Solutions Group revenue for the three and six months ended April 30, 2024 decreased 10 percent and 11 percent, respectively, compared to the same periods last year. Revenues associated with acquisitions had a favorable impact of 1 percentage point on the year-over-year revenue change for the three and six months ended April 30, 2024. Foreign currency movements had an unfavorable impact of 1 percentage point and an immaterial impact, respectively, on the year-over-year revenue change for the three and six months ended April 30, 2024. Revenue declined across all regions and in both the commercial communications and the aerospace, defense, and government end markets for the three and six months ended April 30, 2024. The Communications Solutions Group revenue for the three and six months ended April 30, 2024 declined as compared to last year, primarily driven by overall lower investments and a strong compare to last year, which benefited from robust backlog conversion. Our customers continued to make R&D investments in next-generation technologies and applications, including AI-driven data center expansion, ongoing 5G standards development and deployment, 400G/800G/terabit Ethernet, development of new communications technologies (e.g., 6G, Open Radio Access Networks, commercial non-terrestrial networks, quantum), high-speed networking and major defense and government programs worldwide.

Previous wording

The commercial communications end market revenue for the three months ended January 31, 2024, decreased 14 percent year-over-year and represented 65 percent of total Communications Solutions Group revenue. For the three months ended January 31, 2024, revenue declined across all regions. The decline was driven by post-pandemic supply/demand dynamics as customers remain cautious in their spending across the communications ecosystem. However, we continue to see investments in high-speed networks due to increasing need for AI capabilities across the entire data center ecosystem, which is driving demand for our 400G/800G solutions, both in R&D and manufacturing.

Current wording

The commercial communications end market revenue for the three and six months ended April 30, 2024, decreased 10 percent and 12 percent, respectively, year-over-year and represented 67 percent and 66 percent, respectively, of total Communications Solutions Group revenue. For the three months ended April 30, 2024, revenue declined in the Americas and Asia Pacific, and was flat in Europe. For the six months ended April 30, 2024, revenue declined across all regions. The decline was driven by reduction in demand as customers remain cautious in their spending across the communications ecosystem, particularly the smartphone, network equipment manufacturing and service provider customers. However, we continued to see investments in high-speed networks due to increasing need for AI capabilities across the entire data center ecosystem, which is driving demand for our 400G/800G/terabit Ethernet solutions, both in R&D and manufacturing.

Previous wording

The aerospace, defense, and government end market revenue for the three months ended January 31, 2024, decreased 5 percent year-over-year and represented 35 percent of total Communications Solutions Group revenue. For the three months ended January 31, 2024, revenue declined double-digits in Asia Pacific, partially offset by an increase in Europe, and was flat in the Americas. We continue to see investments in electromagnetic spectrum operations, cybersecurity, and space and satellite solutions, as well as next-generation commercial technologies like 5G and early 6G research applications.

Current wording

The aerospace, defense, and government end market revenue for the three and six months ended April 30, 2024, decreased 11 percent and 8 percent, respectively, year-over-year and represented 33 percent and 34 percent, respectively, of total Communications Solutions Group revenue. For the three months ended April 30, 2024, revenue declined in Asia Pacific and Europe, partially offset by an increase in the Americas. For the six months ended April 30, 2024, revenue declines in Asia Pacific were partially offset by an increase in the Americas and Europe. We continue to see investments in radar and spectrum operations, space and satellite solutions and signal monitoring.

Previous wording

Operating margin for the three months ended January 31, 2024 decreased 2 percentage points compared to the same period last year, primarily driven by higher operating expenses as a percentage of sales, partially offset by gross margin gains.

Current wording

Operating margin for the three and six months ended April 30, 2024 decreased 2 percentage points compared to the same periods last year, primarily driven by higher operating expenses as a percentage of sales.

Previous wording

The Electronic Industrial Solutions Group ("EISG") serves customers across a diverse set of end markets focused on automotive and energy, semiconductor solutions, and general electronics. The group's solutions consist of electronic design, test and simulation software, instrumentation, systems, and related services. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of electronic equipment. In addition, the group provides automated software test solutions that include AI-ML to automatically identify, build, and execute tests critical to digital business success and a strong customer experience. Our recent acquisition of ESI Group expands our application layer portfolio with simulation capabilities in automotive and general electronics sectors.

Current wording

The Electronic Industrial Solutions Group ("EISG") serves customers across a diverse set of end markets focused on automotive and energy, semiconductor solutions, and general electronics. The group's solutions consist of electronic design, test and simulation software, instrumentation, systems, and related services. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of electronic equipment. In addition, the group provides automated software test solutions to automatically identify, build, and execute tests critical to digital business success and a strong customer experience. Our recent acquisition of ESI Group expands our application layer portfolio with simulation capabilities in automotive and general electronics sectors.

Previous wording

The Electronic Industrial Solutions Group revenue for the three months ended January 31, 2024 decreased 5 percent compared to the same period last year. Revenues associated with acquisitions had a favorable impact of 14 percentage points on the year-over-year revenue change. Foreign currency movements had an immaterial impact on the year-over-year revenue change. For the three months ended January 31, 2024, revenue declined in Asia Pacific and the Americas, partially offset by an increase in Europe. The declines in general electronics measurement and semiconductor measurement solutions were partially offset by growth in automotive and energy driven by the acquisition of ESI Group. The decline in revenue reflects the normalization in demand as customer spending remained cautious due to continued macroeconomic headwinds. Despite delays in their near-term spending, customer engagement remains high as they continue to invest in key long-term strategic initiatives, such as next-generation electric vehicle ("EV") and autonomous vehicle ("AV"), digital health, industrial IoT, and advanced semiconductor technologies.

Current wording

The Electronic Industrial Solutions Group revenue for the three and six months ended April 30, 2024 decreased 17 percent and 11 percent, respectively, compared to the same periods last year. Revenues associated with acquisitions had a favorable impact of 5 percentage points and 9 percentage points, respectively, on the year-over-year revenue change for the three and six months ended April 30, 2024. Foreign currency movements had an unfavorable impact of 1 percentage point on the year-over-year revenue change for the three and six months ended April 30, 2024. For the three months ended April 30, 2024, revenue declined in Asia Pacific, partially offset by an increase in the Americas and was flat in Europe. For the six months ended April 30, 2024, revenue declined in Asia Pacific and the Americas, partially offset by an increase in Europe. For the three months ended April 30, 2024, revenue declined across all the markets. For the six months ended April 30, 2024, declines in general electronics measurement and semiconductor measurement solutions were partially offset by growth in automotive and energy driven by the acquisition of ESI Group.

Previous wording

R&D expense for the three months ended January 31, 2024 increased 13 percent compared to the same period last year, primarily driven by incremental costs due to the ESI Group acquisition, partially offset by lower variable people-related costs. We continue to invest in key growth opportunities in our end markets and leading-edge technologies.

Current wording

R&D expense for the three and six months ended April 30, 2024 increased 11 percent and 12 percent, respectively, compared to the same periods last year, primarily driven by incremental costs from the ESI Group acquisition, partially offset by lower variable people-related costs. We continue to prioritize investment in key growth opportunities in our end markets and leading-edge technologies.

Previous wording

Selling, general and administrative expense for the three months ended January 31, 2024 increased 11 percent compared to the same period last year, primarily driven by incremental costs due to the ESI Group acquisition, partially offset by lower variable people-related costs.

Current wording

Selling, general and administrative expense for the three and six months ended April 30, 2024 increased 11 percent compared to the same periods last year, primarily driven by incremental costs due to the ESI Group acquisition, partially offset by lower people-related and infrastructure costs.

Previous wording

Other operating expense (income), net for the three months ended January 31, 2024 and 2023 was zero and income of $1 million, respectively.

Current wording

Other operating expense (income), net for the three months ended April 30, 2024 and 2023 was zero and income of $1 million, respectively. Other operating expense (income), net for the six months ended April 30, 2024 and 2023 was zero and income of $2 million, respectively.

Previous wording

Cash flows from operating activities can fluctuate significantly from period to period due to working capital needs, the timing of payments for income taxes, variable pay, and pension funding and other items that impact reported cash flows.

Current wording

Cash flows from operating activities can fluctuate significantly from period to period due to working capital needs, the timing of payments for income taxes, variable pay, pension funding, and other items that impact reported cash flows.

Previous wording

Net cash provided by operating activities decreased $38 million during the three months ended January 31, 2024 compared to the same period last year.

Current wording

Net cash provided by operating activities decreased $351 million during the six months ended April 30, 2024 compared to the same period last year.

Previous wording

•Net income for the three months ended January 31, 2024 decreased $88 million compared to the same period last year. Non-cash adjustments to net income were higher by $20 million primarily due to a $14 million increase in amortization, a $7 million increase in deferred tax expense, a $2 million decrease in unrealized gains on equity and other investments, and a $3 million increase in other non-cash adjustments, partially offset by a $6 million decrease in share-based compensation.

Current wording

•Net income for the six months ended April 30, 2024 decreased $245 million compared to the same period last year. Non-cash adjustments to net income were higher by $25 million primarily due to a $30 million increase in amortization and depreciation, a $5 million increase in excess and obsolete inventory-related charges, partially offset by a $7 million increase in deferred tax benefit, and a $3 million decrease in other non-cash expenses.

Previous wording

•The aggregate of accounts receivable, inventory and accounts payable provided net cash of $83 million during the first three months of fiscal 2024 compared to net cash used of $57 million in the same period last year, primarily due to higher collections relative to revenue and lower payments. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory and accounts payable depends upon the cash conversion cycle, which represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of shipments and purchases, as well as collections and payments in a period.

Current wording

•The aggregate of accounts receivable, inventory and accounts payable provided net cash of $60 million during the first six months of fiscal 2024 compared to net cash used of $73 million in the same period last year, primarily due to timing of collections relative to revenue, a lower increase in inventory and lower payments. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory and accounts payable depends upon the cash conversion cycle, which represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of shipments and purchases, as well as collections and payments in a period.

Previous wording

•Other movements in assets and liabilities used net cash of $53 million during the first three months of fiscal 2024 compared to net cash provided of $57 million in the same period last year, primarily driven by payments on settlement of foreign exchange forward contracts associated with the ESI Group acquisition, lower deferred revenue, lower income and other tax accruals, net of payments, and changes in other assets and liabilities.

Current wording

•Other movements in assets and liabilities used net cash of $144 million during the first six months of fiscal 2024 compared to net cash provided of $13 million in the same period last year, primarily driven by lower cash from deferred revenue, payments on settlement of foreign exchange forward contracts associated with the ESI Group acquisition, lower income and other tax accruals, net of payments, and changes in other assets and liabilities.

Previous wording

Net cash used in investing activities increased $451 million during the three months ended January 31, 2024 compared to the same period last year. For the three months ended January 31, 2024 we used $477 million, net of $35 million cash acquired, primarily for the acquisition of the controlling block of ESI Group shares. Investments in property, plant and equipment were $47 million and $60 million for the three months ended January 31, 2024 and 2023, respectively. For the three months ended January 31, 2024 we received $11 million proceeds from the sales and maturities of investments.

Current wording

Net cash used in investing activities increased $426 million during the six months ended April 30, 2024 compared to the same period last year. For the six months ended April 30, 2024, we used $556 million, net of cash acquired for payments towards acquisitions, including $477 million, net of $35 million cash acquired, for the acquisition of the controlling block of ESI Group shares. For the six months ended April 30, 2023, we used $85 million, net of cash acquired, to acquire Cliosoft. Excluding payments for acquisitions, net cash used for investing activities decreased $45 million, driven by $30 million lower investments in property, plant and equipment, and $15 million from other net investing activities.

Previous wording

Our financing activities primarily include proceeds from issuance of common stock under employee stock plans, tax payments related to net share settlement of equity awards, treasury stock repurchases, and transactions with non-controlling interests in partially-owned consolidated subsidiaries.

Current wording

Our financing activities primarily include proceeds from issuance of common stock under employee stock plans, tax payments related to net share settlement of equity awards, issuances and repayment of debt and related costs, treasury stock repurchases, and transactions with non-controlling interests in partially-owned consolidated subsidiaries.

Previous wording

Net cash used in financing activities increased $409 million during the three months ended January 31, 2024 compared to the same period last year, primarily due to $458 million used for the acquisition of the non-controlling interest in ESI Group, partially offset by $32 million lower treasury stock repurchases and $18 million lower tax payments related to net share settlement of equity awards.

Current wording

Net cash used in financing activities increased $481 million during the six months ended April 30, 2024 compared to the same period last year, primarily due to $458 million used for the acquisition of the non-controlling interest in ESI Group, $24 million used for repayment of debt assumed as part of the ESI Group acquisition, $14 million higher treasury stock repurchases and $5 million used for payment of bridge loan facility fees, partially offset by $19 million lower tax payments related to net share settlement of equity awards.