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What changed in Keysight Technologies's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Keysight Technologies's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+426 added−463 removedSource: 10-K (2023-12-15) vs 10-K (2022-12-15)

Top changes in Keysight Technologies's 2023 10-K

426 paragraphs added · 463 removed · 306 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+67 added−115 removed30 unchanged
Biggest changeOur Corporate Governance Guidelines, the charters of our Audit and Finance Committee, Compensation and Human Capital Committee, Nominating and Corporate Governance Committee, Executive Committee as well as our SBC and Corporate Social Responsibilities reports are available on our website at www.investor.keysight.com under “Corporate Governance.” These items are also available in print to any stockholder in the United States and Canada who requests them by calling (800) 829-4444.
Biggest changeWe make available, free of charge, printed copies of our annual report on Form 10-K, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. 15 Table of Contents Our Corporate Governance Guidelines, the charters of our Audit and Finance Committee, Compensation and Human Capital Committee, Nominating and Corporate Governance Committee, and Executive Committee, as well as our SBC and Corporate Social Responsibilities reports are available on our website at www.investor.keysight.com under “Corporate Governance.” These items are also available in print to any stockholder in the United States and Canada who requests them by calling (800) 829-4444.
Hiring, Retention and Succession Planning We understand that Science, Technology, Engineering and Math ("STEM") education is critical to creating a pipeline of future engineers, and we provide global support for STEM education through a variety of company-sponsored and employee-led programs, which introduce school-age students to engineering.
Hiring, Retention and Succession Planning We understand that Science, Technology, Engineering and Math ("STEM") education is critical to creating a pipeline of future engineers. We provide global support for STEM education through a variety of company-sponsored and employee-led programs, which introduce school-age students to engineering.
Previously, she was Vice President and General Manager of Keysight’s General Electronics Measurement Solutions from November 2015 to September 2020. Ms. Ee concurrently served as Vice President of Keysight Education from September 2018 to September 2020. From June 2013 to October 2015, Ms. Ee was the Vice President and General Manager of Keysight’s General-Purpose Electronic Measurement Division. Ms.
Previously, she was Vice President and General Manager of Keysight’s General Electronics Measurement Solutions from November 2015 to October 2020. Ms. Ee concurrently served as Vice President of Keysight Education from September 2018 to October 2020. From June 2013 to November 2015, Ms. Ee was the Vice President and General Manager of Keysight’s General-Purpose Electronic Measurement Division. Ms.
Sales The Chief Customer Officer is responsible for developing and executing the company’s customer-centric vision by enhancing the end-to-end customer experience; enabling customer success through the seamless delivery of first-to-market solutions to a diverse, global customer base; and expanding Keysight’s go-to-market strategies across all regions and ecosystems.
Sales Our Chief Customer Officer is responsible for developing and executing the company’s customer-centric vision by enhancing the end-to-end customer experience, enabling customer success through the seamless delivery of first-to-market solutions to a diverse, global customer base, and expanding Keysight’s go-to-market strategies across all regions and ecosystems.
Pursuant to the Consent Agreement, we were assessed a penalty of $6.6 million to be paid over three years, $2.5 million of which was suspended and designated for remediation activities over three years, including employment of a special compliance officer. To date, we have paid $2.1 million of the penalty.
Pursuant to the Consent Agreement, we were assessed a penalty of $6.6 million to be paid over three years, $2.5 million of which was suspended and designated for remediation activities over three years, including employment of a special compliance officer. To date, we have paid $3.1 million of the penalty.
Our in-house manufacturing efforts are focused on the highest value added, more complex and highly technical aspects of production, and we use contract manufacturers for assembly, printed circuit board production and chassis assembly.
Our in-house manufacturing efforts are focused on the highest value added, more complex and highly technical aspects of production and plating. We use contract manufacturers for assembly, printed circuit board production and chassis assembly.
We conduct R&D in four principal areas: enabling technologies, system design, simulation, and measurement with the aim of building a strong foundation for next-generation and longer-term solutions. Our most significant technology development centers are in California, Colorado and Texas in the United States, and in Romania, Malaysia, India, China, United Kingdom, Spain, Germany and Japan.
We conduct R&D in four principal areas: enabling technologies, system design, simulation, and measurement, with the aim of building a strong foundation for next-generation and longer-term solutions. Our most significant technology development centers are in the United States (California, Colorado and Texas), India, Malaysia, Romania, Germany, China, Japan, United Kingdom, Spain, Singapore and Finland.
We have centralized manufacturing in Penang, Malaysia, our largest manufacturing facility, which focuses on the final assembly of our most sophisticated instruments and on final tuning, calibration and test of instruments across the broader portfolio. Our other principal manufacturing facilities are in California and Colorado in the United States, and Germany and Japan outside of the United States.
We have centralized manufacturing in Penang, Malaysia, our largest manufacturing facility, which focuses on the final assembly of our most sophisticated instruments and on final tuning, calibration and test of instruments across the broader portfolio. Our other principal finished good manufacturing facilities are in California and Colorado in the United States, and Germany and Japan outside of the United States.
John Page, 58, has served as Senior Vice President and President of Global Services since November 2015 and most recently served as Vice President of business finance of Keysight from February 2014 to November 2015. Prior to joining Keysight, Mr. Page served as the Chief Financial Officer of Nanosys, Inc. from 2010 to 2014.
John Page, 59 , has served as Senior Vice President and President of Global Services since November 2015 and most recently served as Vice President of business finance of Keysight from February 2014 to November 2015. Prior to joining Keysight, Mr. Page served as the Chief Financial Officer of Nanosys, Inc. from 2010 to 2014.
He served as Senior Director in Agilent’s Corporate Development Group from 2010 to 2012, and from 2006 to 2010, he served as Agilent’s Assistant Treasurer. Huei Sin Ee, 56, has served as Keysight’s Senior Vice President and President of the Electronic Industrial Solutions Group since October 2020.
He served as Senior Director in Agilent’s Corporate Development Group from 2010 to 2012, and from 2006 to 2010, he served as Agilent’s Assistant Treasurer. Huei Sin Ee, 57, has served as Keysight’s Senior Vice President and President of the Electronic Industrial Solutions Group since October 2020.
Working with Human Resources, business leaders develop retention strategies and initiatives to keep critical talent focused and engaged and to minimize attrition. The average tenure of our employees is 12.2 years. Our three-year average employee turnover rate was approximately 7 percent and has been lower than the industry average for the past five years.
Working with Human Resources, business leaders develop retention strategies and initiatives to keep critical talent focused and engaged and to minimize attrition. The average tenure of our employees is 12.6 years. Our three-year average employee turnover rate was approximately 7.5 percent and has been lower than the industry average for the past five years.
These regulations may differ by country, requiring us to keep track of varied and complex requirements. In the U.S. we are subject to federal and state Occupational Health and Safety laws as well as federal, state and local requirements. Executive Officers of the Registrant The following is information regarding our executive officers as of December 1, 2022. Ronald S.
These regulations may differ by country, requiring us to keep track of varied and complex requirements. In the U.S. we are subject to federal and state Occupational Health and Safety laws as well as federal, state, and local requirements. Executive Officers of the Registrant The following is information regarding our executive officers as of December 1, 2023.
Neil Dougherty , 53, has served as Executive Vice President and Chief Financial Officer since May 2022 and as Senior Vice President and Chief Financial Officer of Keysight since December 2013. From 2012 to December 2013, Mr. Dougherty served as Vice President and Treasurer of Agilent.
Neil Dougherty , 54, has served as Executive Vice President and Chief Financial Officer since May 2022 and as Senior Vice President and Chief Financial Officer of Keysight since December 2013. From 2012 to December 2013, Mr. Dougherty served as Vice President and Treasurer of Agilent.
Risk Factors.” Government Regulations Our company is subject to various federal, state, local and international laws and regulations relating to the development, manufacture, sale and distribution of our products and solutions, and it is our policy to comply with the laws in every jurisdiction in which we conduct business.
Government Regulations Our company is subject to various federal, state, local, and international laws and regulations relating to the development, manufacture, sale, and distribution of our products and solutions, and it is our policy to comply with the laws in every jurisdiction in which we conduct business.
This information is also available by writing to the company at the address on the cover of this Annual Report on Form 10-K. 19 Table of Contents
This information is also available by writing to the company at the address on the cover of this Annual Report on Form 10-K. 16 Table of Contents
Narayanan served as President of the Commercial Communications business. He served as Vice President and General Manager, Wireless Test Business Unit, from September 2017 until November 2020, and was Vice President and General Manager, Wireless Devices from May 2016 until September 2017. From November 2014 until May 2016, Mr. Narayanan served as R&D Senior Manager of Keysight's Mobile Broadband business.
He served as Vice President and General Manager, Wireless Test Business Unit, from September 2017 until November 2020, and was Vice President and General Manager, Wireless Devices from May 2016 until September 2017. From November 2014 until May 2016, Mr. Narayanan served as R&D Senior Manager of Keysight's Mobile Broadband business.
On December 17, 2021, Keysight and HP signed a restrictive covenant related to our Santa Rosa facility which prohibits certain uses of the property (such as running a daycare facility, hospital or school) and terminates HP’s remediation obligation related to that facility. HP’s remediation obligations relating to Keysight’s Colorado Springs facility are ongoing.
On December 17, 2021, Keysight and HP signed a restrictive covenant related to our Santa Rosa facility that prohibits certain uses of the property (such as running a daycare facility, hospital, or school) and terminates HP’s 13 Table of Contents remediation obligation related to that facility. HP’s remediation obligations relating to Keysight’s Colorado Springs facility are ongoing.
We identify diversity recruiting business champions to develop business-specific talent acquisition plans, and we have partnerships with universities worldwide that are aligned with our strategic talent needs, including Historically Black Colleges and Universities ("HBCU") in the United States.
We identify diversity recruiting business champions who develop business-specific talent acquisition plans, and we have partnerships with universities worldwide that are aligned with our strategic talent needs, including Historically Black Colleges and Universities in the United States.
Once retired, these former employees are given the opportunity to consult with us on a limited basis to provide on-going mentoring and training. Diversity and Equal Employment Policy We are an equal opportunity employer, and we are committed to maintaining a diverse and inclusive work environment that is free from harassment and discrimination.
Once retired, these former employees are given the opportunity to consult with us on a limited basis to provide on-going mentoring and training. 11 Table of Contents Diversity and Equal Employment Policy We are an equal opportunity employer, and we are committed to maintaining a diverse and inclusive work environment that is free from harassment and discrimination.
We emphasize on-the-job learning through stretch assignments and development opportunities, as well as education. Our employees have access to a wide range of programs, workshops, classes and resources to help them excel in their careers. Our Keysight University platform offers training and development programs, as well as learning resources.
We prioritize on-the-job learning through stretch assignments, development opportunities, and educational resources. Our employees have access to a wide range of programs, workshops, classes, and resources to help them excel in their careers. Our Keysight University platform offers training and development programs, as well as learning resources.
Import/Export Regulations We sell products and solutions to customers all over the world and are required to comply with the U.S Export Administration Regulations and economic and trade sanctions programs limiting or banning sales into certain countries. Countries outside of the U.S. have implemented similar controls and sanction regulations.
Import/Export Regulations We sell products and solutions to customers all over the world and are required to comply with the U.S Export Administration Regulations and economic and trade sanctions programs that limit or ban sales into certain countries. Countries outside of the U.S. have implemented similar controls and sanction regulations.
The value we place on diversity, equity and inclusion ("DE&I") is a competitive advantage, and it helps us attract and retain the best talent and drive high performance through innovation and collaboration. We benefit from the innovation that results when people with differing experiences, perspectives and cultures work together. DE&I is among our top priorities.
The value we place on diversity, equity and inclusion ("DEI") is a competitive advantage, and it helps us attract and retain the best talent and drive high performance through innovation and collaboration. We benefit from the innovation that results when people with differing experiences, perspectives, and cultures work together.
Of those employees, 5,500 are located in the Americas (including 5,300 in the U.S.), 2,800 are located in Europe and 6,700 are located in Asia. Culture, Values and Standards Our core values and culture reflect a commitment to ethical business practices and outstanding corporate citizenship.
Of those employees, 5,500 are located in the Americas (including 5,300 in the United States), 2,800 are located in Europe, and 6,600 are located in Asia Pacific. Culture, Values and Standards Our core values and culture reflect a commitment to ethical business practices and outstanding corporate citizenship.
Human Capital We have a diverse, inclusive and respectful work environment, where employees are offered challenging assignments, development opportunities, competitive salaries and a safe workplace. As of October 31, 2022, we had approximately 15,000 employees worldwide representing more than 80 self-identified nationalities working in 30 countries.
Risk Factors.” Human Capital We have a diverse, inclusive, and respectful work environment, where employees are offered challenging assignments, development opportunities, competitive salaries and a safe workplace. As of October 31, 2023, we had approximately 14,900 employees worldwide representing more than 80 nationalities working in 30 countries.
The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers. You can access financial and other information at our Investor Relations website at www.investor.keysight.com.
Therefore, we file periodic reports, proxy statements, and other information with the Securities and Exchange Commission (“SEC”). The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers. You can access financial and other information at our Investor Relations website at www.investor.keysight.com.
In an effort to enable employees to be successful, we provide mentoring programs, inclusive benefits, access to employee network groups, and training for every stage of employment. As of October 31, 2022, women represented 30.6 percent of our global workforce, and underrepresented minorities represented 37.7 percent of the U.S. workforce.
In an effort to enable employees to be successful, we provide mentoring programs, inclusive benefits, access to employee network groups, and training for every stage of employment. As of October 31, 2023, women represented 31 percent of our global workforce, and underrepresented minorities represented 44.4 percent of the United States workforce.
For fiscal year 2023, the adjusted hiring goals for global external new hires being women is 33.6 percent, and external new hires in the U.S. being underrepresented minorities is 50.1 percent. A metric in our short-term executive compensation program for fiscal year 2023 is tied to the achievement of these goals.
For fiscal year 2024, the adjusted hiring goals for global external new women hires is 34.4 percent, and external new underrepresented minorities hires in the United States is 50.1 percent. A metric in our short-term executive compensation program for fiscal year 2024 is tied to the achievement of these goals.
We are committed to maintaining a work environment founded on respect for all, regardless of race, color, age, gender, sexual orientation, gender identity and expression, ethnicity, religion, disability, veteran status, national origin, or any protected class.
We are committed to maintaining a work environment founded on respect for all, regardless of race, color, age, sex, sexual orientation, gender identity and expression, ethnicity, religion, disability, veteran status, national origin, or any protected class. Our Harassment Policy requires that all who work for Keysight be treated with dignity, respect, and courtesy.
We employ a multi-pronged marketing strategy to enhance brand equity, including articulating a strong, cohesive brand purpose, establishing our presence and thought leadership in existing and promising emerging markets, resulting in one powerful brand voice for Keysight.
We employ a multi-pronged marketing strategy to enhance brand equity, as well as proving our presence and thought leadership in existing and emerging markets, resulting in one powerful brand voice for Keysight.
Ee served as Vice President and General Manager of Agilent’s Basic Instruments Division from February 2005 to May 2013. 18 Table of Contents Ingrid Estrada , 58, has served as Senior Vice President, Chief People and Administrative Officer and Chief of Staff since August 2017.
Ee served as Vice President and General Manager of Agilent’s Basic Instruments Division from February 2005 to May 2013. Ingrid Estrada , 59, has served as Senior Vice President, Chief People and Administrative Officer and Chief of Staff since August 2017. Previously, she served as Keysight’s Senior Vice President, Human Resources from December 2013 until August 2017.
Our business leaders are required to periodically evaluate employee contributions to the company and to identify key contributors, as well as those in need of improvement. Our annual rewards process provides employees with feedback on their 14 Table of Contents performance over the past fiscal year and rewards achievement.
Our business leaders are required to periodically evaluate employee contributions to the company and to identify key contributors, as well as those in need of improvement. At least annually, we provide employees with feedback on their performance over the past fiscal year.
Health, Safety and Wellness We strive to maintain a best-in-class work environment and provide a safe and healthy workplace for all employees. We accomplish this through strict compliance with applicable laws and regulations regarding workplace safety. Our programs include recognition and control of workplace hazards, ergonomics training, a global travel health program, and robust emergency and disaster recovery plans.
We accomplish this through strict compliance with applicable laws and regulations regarding workplace safety. Our programs include recognition and control of workplace hazards, ergonomics training, a global travel health program, and robust emergency and disaster recovery plans.
From November 2011 to November 2014, he served as Americas Field Operations Vice President of Agilent's Electronic Measurement Group. Investor Information We are subject to the informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”). Therefore, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).
From November 2014 to November 2016, Mr. Wallace served as Vice President and General Manager of Americas Field Operations. From November 2011 to November 2014, he served as Americas Field Operations Vice President of Agilent's Electronic Measurement Group. Investor Information We are subject to the informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”).
Research and Development We are committed to investing in R&D and have focused our development efforts on key strategic opportunities that align our business with available markets, and position the company for growth.
For a discussion of risks related to competition, please refer to “Item 1A. Risk Factors.” Research and Development We are committed to investing in R&D and have focused our development efforts on strategic opportunities that align our business with available markets and position the company for growth.
Soon Chai Gooi , 61, has served as Senior Vice President, Order Fulfillment and Digital Operations since October 2020 and as Senior Vice President and President of the Electronic Industrial Solutions Group since November 2015. From December 2013 to November 2015, Mr. Gooi served as Senior Vice President of Order Fulfillment and Infrastructure for Keysight. Mr.
From 2011 until December 2013, she served as Vice President and General Manager of Global Sourcing of Agilent. Soon Chai Gooi , 62, has served as Senior Vice President, Order Fulfillment and Digital Operations since October 2020 and as Senior Vice President and President of the Electronic Industrial Solutions Group from November 2015 to October 2020.
The suspended portion of the penalty has been satisfied by amounts we have spent on qualifying compliance activities to date. 17 Table of Contents In February 2022, the U.S. imposed economic sanctions and other restrictions on Russia following its invasion of Ukraine.
The suspended portion of the penalty has been satisfied by amounts we have spent on qualifying compliance activities to date. In February 2022, the U.S. imposed economic sanctions and other restrictions on Russia following its invasion of Ukraine. As a result, after an initial suspension of operations in Russia, we permanently discontinued our Russian operations and are exiting Russia.
Our application engineers bring deep solution and application expertise to provide a combination of consulting, systems integration and software engineering services that span all stages of the sale, deployment and support of our complex systems and solutions.
Our application engineers bring deep solution and application expertise to provide a combination of consulting, systems integration and software engineering services that span all stages of the sale, deployment and support of our complex systems and solutions. We also have a global software subscription and renewals channel, selling our standalone enterprise software solutions including computer-aided engineering and design workflow solutions.
We hold an annual Keysight Executive Development ("KED") program with senior leaders to align on strategy and key focus areas for the company. Compensation and Benefits We compensate employees with competitive wages and benefit programs designed to meet employee needs. Our compensation and benefit programs are designed to recognize our employees' contributions to value creation and business results.
We also have leadership development programs including training for new managers and development through ExecOnline. We hold an annual Keysight Executive Development program with senior leaders to align on strategy and key focus areas for the company. Compensation and Benefits We compensate employees with competitive wages and benefit programs designed to meet employee needs.
Dhanasekaran served as the General Manager of the Mobile Broadband Operation, and from November 2014 through June 2015, he led the marketing function for the Signal Analysis and Signal Sources Division.
Dhanasekaran served as Keysight’s Vice President and General Manager, Wireless Devices and Operators Business Unit. From 14 Table of Contents June 2015 to May 2016, Mr. Dhanasekaran served as the General Manager of the Mobile Broadband Operation, and from November 2014 through June 2015, he led the marketing function for the Signal Analysis and Signal Sources Division.
Communications Solutions Group The Communications Solutions Group serves customers spanning the worldwide commercial communications and aerospace, defense and government end markets. The group's solutions consist of electronic design and test software, electronic measurement instruments, systems and related services. These solutions are used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment and networks.
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.
Marketing Keysight Global Marketing builds the company brand and drives growth through programs that increase awareness, reputation, and demand for Keysight’s design, simulation, emulation, and test solutions.
Electronic commerce and telesales channels are also in place for transactional, lower-touch sales. Marketing Keysight Global Marketing builds the company brand and drives growth through programs that increase awareness, demand, and engagement for Keysight’s design, simulation, emulation, and test solutions.
We have compliance policies, programs and training to prevent non-compliance with such anti-corruption regulations in the U.S. and outside of the U.S. We monitor pending and proposed legislation and regulatory changes that may impact our business and develop strategies to address the changes and incorporate them into existing compliance programs.
We monitor pending and proposed legislation and regulatory changes that may impact our business and develop strategies to address the changes and incorporate them into existing compliance programs.
Keysight is viewed as a trusted adviser and partner across multiple industries. • Technology leadership as a competitive differentiator. Proprietary software and hardware technologies unavailable in the commercial market and developed by our R&D technology centers around the world enable many Keysight products to deliver the best design and measurement solution capability available for our customers’ engineering requirements.
The proprietary software and hardware technologies unavailable in the commercial markets and developed by our R&D technology centers around the world enable many Keysight products to deliver differentiated design and measurement solution capability to address our customers' engineering requirements.
We adhere to the tenets of the United Nations Guiding Principles on Business and Human Rights, and core International Labor Organization conventions, and we are an affiliate member of the Responsible Business Alliance. We comply with the labor and employment laws of all countries in which we operate, prioritizing fair employment practices, labor compliance, non-discrimination and equal employment opportunity.
We adhere to the tenets of the United Nations Guiding Principles on Business and Human Rights, and core International Labor Organization conventions, and we are an affiliate member of the Responsible Business Alliance.
These reviews provide visibility to top talent, potential leadership gaps, and development plans. Globally, 4 percent of our employee population is eligible to retire. In the U.S. and Japan, employees eligible to retire are 24.8 percent and 17.3 percent, respectively. We recognize that many of these employees have valuable skills and historical information and that knowledge transfer is critical.
These reviews provide visibility to top talent, potential leadership gaps, and development plans. Globally, many of our employee population is eligible to retire. These employees often have valuable skills and historical information and knowledge transfer is critical. We have knowledge transfer practices and programs to enable us to retain critical knowledge.
Gooi served as President, from November 2012 to September 2013, and as Senior Vice President, from December 2011 to November 2012, of Agilent's Order Fulfillment and Supply Chain. Jeffrey Li , 53, has served as Senior Vice President, General Counsel, and Secretary since July 2019. From December 2013 through July 2019, Mr.
From December 2013 to November 2015, Mr. Gooi served as Senior Vice President of Order Fulfillment and Infrastructure for Keysight. Mr. Gooi served as President, from November 2012 to September 2013, and as Senior Vice President, from December 2011 to November 2012, of Agilent's Order Fulfillment and Supply Chain.
Li served as Vice President, Assistant General Counsel, and Assistant Secretary of Keysight, and as Senior Counsel of Agilent from 2011 to December 2013. Kailash Narayanan , 49 , has served as Keysight's Senior Vice President and President of the Communications Solutions Group since November 2021. From November 2020 until November 2021, Mr.
Kailash Narayanan , 50 , has served as Keysight's Senior Vice President and President of the Communications Solutions Group since November 2021. From November 2020 until November 2021, Mr. Narayanan served as President of the Commercial Communications business.
As a result, after an initial suspension of operations in Russia, we permanently discontinued our Russian operations and are exiting Russia. Changes in these or other import or export laws and regulations may restrict or further restrict our ability to sell certain products and solutions and may require us to develop additional compliance programs and training.
Changes in these or other import or export laws and regulations may restrict or further restrict our ability to sell certain products and solutions and may require us to develop additional compliance programs and training. Anti-Corruption Regulations As a result of our extensive international operations, we must comply with complex foreign and U.S. laws and regulations, such as the U.S.
Revenue, income from operations and assets by business segment as of and for the fiscal years ended October 31, 2022, 2021, and 2020, are provided in Note 16, "Segment Information," to our consolidated financial statements. We had more than 18,000 direct customers for our solutions and services in 2022 and over 30,000 customers globally, including indirect channels.
We generated $5.5 billion, $5.4 billion and $4.9 billion of revenue in 2023, 2022, and 2021, respectively. Revenue, income from operations and assets by business segment as of and for the fiscal years ended October 31, 2023, 2022, and 2021, are provided in Note 16, "Segment Information," to our consolidated financial statements.
Anti-Corruption Regulations As a result of our extensive international operations, we must comply with complex foreign and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations.
Foreign Corrupt Practices Act, the U.K. Bribery Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations. We have compliance policies, programs, and training to prevent non-compliance with such anti-corruption regulations in the U.S. and outside of the U.S.
To address the potential disruption in, and other risks related to, our supply chain, we use a number of techniques, including qualifying multiple sources of supply and redesign of solutions for alternative components. In addition, while we generally attempt to keep our inventory at optimal levels, we do purchase incremental inventory as circumstances warrant to protect the supply chain.
In addition, while we generally attempt to keep our inventory at optimal levels, we do purchase incremental inventory as circumstances warrant to protect the supply chain. For a further discussion of risks related to the manufacturing and materials and components required for our operations, please refer to “Item 1A.
Our direct sales organizations serve customers globally across the commercial communications, aerospace, defense and government, automotive and energy, semiconductor, general electronics, network test and network visibility markets. To complement our direct sales force, we have an extensive network of channel partners around the world. These channel partners include resellers, manufacturer’s representatives and distributors.
To complement our direct sales force, we have an extensive network of over 800 channel partners around the world. These channel partners include resellers, manufacturer’s representatives, and distributors. They serve thousands of customers across a wide range of end-user markets.
We promote the health and wellness of our employees through our Employee Well Being programs and workplace accessibility and accommodations.
We promote the health and wellness of our employees through our Employee Well Being programs, our Employee and Family Assistance Program (which includes twelve free sessions with therapists and mental health coaches per year), and workplace accessibility and accommodations.
In order to increase the pool of diverse candidates for open positions, we participate in diversity-focused career fairs and conferences in the U.S., Asia and Europe.
We have a DEI Director who is responsible for driving strategy and for implementing new and ongoing DEI initiatives. To increase the pool of diverse candidates for open positions, we participate in diversity-focused career fairs and conferences in the United States, Asia, and Europe.
We anticipate that we will continue to have significant R&D expenditures in order to maintain our competitive position with a continuous flow of innovative, high-quality software and hardware embedded in customer solutions, products and services. Service Solutions Our service solutions include product support services, technical support and training and consulting.
We anticipate that we will continue to maintain R&D expenditures to deliver a continuous flow of innovative, high-quality customer solutions, products, and services.
Mark Wallace, 57 , has served as Senior Vice President, Chief Customer Officer since September 2022 and as Senior Vice President of Worldwide Sales from November 2016 to September 2022. From November 2014 to November 2016, Mr. Wallace served as Vice President and General Manager of Americas Field Operations.
Poole served as Senior Director, Global Financial Reporting and Compliance from May 2021 to May 2022, and from March 2014 to May 2021, she served as the Director, External Financial Reporting. Mark Wallace, 58, has served as Senior Vice President, Chief Customer Officer since September 2022 and as Senior Vice President of Worldwide Sales from November 2016 to September 2022.
As part of our talent acquisition strategy, we provide training to recruiters and hiring managers to assist them in recruiting and hiring top talent. We had a global job acceptance rate of 83.2 percent in 2022. The number of software engineers in our R&D function have more than doubled since we became an independent company in 2014.
As part of our talent acquisition strategy, we provide training to recruiters and hiring managers to assist them in recruiting and hiring top talent. We had a global job offer acceptance rate of 86.8 percent in 2023.
Our Board has eleven members, three of whom are women, and three are self-identified underrepresented minorities. In the rest of the workforce, we seek to expand hiring of women globally and underrepresented minorities in the U.S. We established annual hiring goals to improve our workforce diversity.
At the senior executive level (Officer, Senior Vice President, Vice President), 27.6 percent were women and 31.8 percent were underrepresented minorities. Our Board of Directors has eleven members, three of whom are women, and three are self-identified underrepresented minorities. In the rest of the workforce, we seek to expand hiring of women globally and underrepresented minorities in the United States.
Many of our employees are required to take annual training courses related to their work, including those pertaining to the environment, data privacy, contributing to an inclusive workplace, and workplace health and safety. We also have leadership development programs including training for new managers and development through ExecOnline.
Our Employee Educational Assistance Program provides financial and management support to eligible employees, allowing them to pursue academic degrees related to their field of work. Many of our employees are required to take annual training courses related to their work, including those pertaining to the environment, data privacy, contributing to an inclusive workplace, and workplace health and safety.
Comprehensive support that includes repair, parts, and accredited calibrations of Keysight products and solutions. • Technical support for software and hardware. Customer support for the usage and utilization of our products such as KeysightCare. • Professional services. Installation, training and engineering services to optimize equipment adoption, utilization, and design of test processes.
Our services offerings are summarized as follows: • Product support services deliver comprehensive support that includes repair, parts, and accredited calibrations of Keysight products and solutions. • Technical and application support for hardware, software, and solutions, known as KeysightCare, allows customers to maximize their productivity and the utility of our products and solutions in their application environment. • Professional services, including installation, training, and engineering services, optimize equipment and solution adoption, utilization, and integration into customers’ unique environments.
The percentage of women in leadership positions (Officer, Senior Vice President, Vice President, Senior Manager, Integrating Manager, Operating Manager and Supervisor) globally was 24.4 percent and the percentage of underrepresented minorities in the U.S. was 33.3 percent. At the senior executive level (Officer, Senior Vice President, Vice President), 23.4 percent were women and 24.0 percent were underrepresented minorities.
The percentage of leadership positions (Officer, Senior Vice President, Vice President, Senior Manager, Integrating Manager, Operating Manager and Supervisor) held by women globally was 25.2 percent and the percentage of leadership positions held by underrepresented minorities in the United States was 39.9 percent.
Instrument software applications are designed to optimize the value that our customers derive from our instruments by providing faster insight and analytics through a combined hardware and software application solution. This solution includes core software used to run our instruments and related applications that are pre-installed on our instruments. ◦ Software application solutions.
Software products are characterized in the following three categories: • Instrument software applications are designed to optimize the value that our customers derive from our instruments, providing faster insight and analytics by integrating the instrument’s hardware and software into an application-focused solution.
He was Senior Vice President and President of the Communications Solutions Group from July 2017 to September 2020. From May 2016 to July 2017, Mr. Dhanasekaran served as Keysight’s Vice President and General Manager, Wireless Devices and Operators Business Unit. From June 2015 to May 2016, Mr.
Satish Dhanasekaran, 51, has served as President and Chief Executive Officer of Keysight since May 2022. He served as Senior Vice President and Chief Operating Officer from October 2020 to May 2022. He was Senior Vice President and President of the Communications Solutions Group from July 2017 to October 2020. From May 2016 to July 2017, Mr.
Our centralized order fulfillment organization allows us to leverage the scale and scope of our business to provide high-quality, market-leading instrument solutions to our customers while generating competitive gross margins. Keysight has a centralized order fulfillment organization that supplies solutions to customers across geographies.
We use a centralized order fulfillment organization that supplies solutions to customers worldwide, allowing us to leverage the scale of our business to provide high-quality products while maintaining competitive gross margins. We complement our in-house capabilities with an extensive network of suppliers and subcontractors, which allows us to adapt to changing market conditions.
Ensuring quality and reliability is an integral part of our new product development processes. • Global sales channel and reach. We have a comprehensive global sales channel with experienced management teams and highly technical sales and application engineers, including a strong local presence in emerging markets.
Keysight primarily employs a comprehensive global direct sales channel with experienced management and highly technical sales and application engineers, including a strong local presence in emerging markets.
We have created knowledge transfer practices to enable us to retain critical knowledge. In the U.S., we have a program specifically designed to enable retirement-ready critical talent to gradually reduce hours leading up to retirement, giving us time to transfer critical information and processes.
In the United States, we have programs specifically designed for retirement-ready employees. We have a retirement planning program that provides a severance payment in exchange for extended notice of retirement. Those who are considered critical talent are given an opportunity to gradually reduce hours leading up to retirement, giving us time to transfer critical information and processes.
Materials Our manufacturing operations employ a wide variety of semiconductors, electromechanical components and assemblies and raw materials, such as plastic resins and sheet metal. We purchase materials from thousands of suppliers on a global basis.
Our manufacturing operations employ a wide variety of semiconductors, electromechanical components and assemblies, and raw materials, such as plastic resins and sheet metal. We purchase materials from various suppliers globally. Some of the parts that require custom design work are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work.
Customer demand is fulfilled by trained engineers and technicians through regional support and service centers located near customers or through on-site teams. Our global presence with localized service proximity is an important factor in sustaining our customers’ solutions, uptime and utilization requirements.
Keysight Global Services provide support services to enable our customers’ success with their Keysight products and solutions. Our global scale is complemented by localized presence with trained engineers and technicians delivering our services via regional support centers located near customers or on-site teams.
We seek to achieve pay parity across our organization and in 2022 maintained a worldwide women-to-men pay parity of nearly 1:1. Listening to Employees We provide multiple avenues for employee input. Our Open-Door Policy provides employees with direct access to any level of management to discuss ideas, get input on career development and discuss concerns in a constructive manner.
Our compensation and benefit programs are designed to recognize our employees' contributions to value creation and business results. We seek to achieve pay parity across our organization and in 2023 maintained a worldwide women-to-men pay parity of nearly 1:1. Listening to Employees We provide multiple avenues for employee input.
Our standalone software solutions enable customers to accelerate their digital design and test workflows and address their design, simulation, emulation, automation, and quality assurance needs in the R&D lab and beyond. These solutions are built on our open and scalable Pathwave software platform and enable our customers to translate virtual designs into real products.
These solutions are built on our open and scalable PathWave software platform and enable our customers to efficiently translate virtual designs into physical products. Our software test automation platform uses artificial intelligence and machine learning ("AI-ML") to accelerate customer productivity in software test creation and execution.
The MyVoice program fosters inclusion through engagement surveys on a variety of topics that give us insight on what employees value and helps us identify where to prioritize our efforts. We also created a global Inclusion Council comprised of employees from all functions across the globe to help formulate our inclusion goals and track our progress.
Our Open-Door Policy provides employees with direct access to any level of management to discuss ideas, get input on career development, and discuss concerns in a constructive manner. The MyVoice program fosters inclusion through engagement surveys on a variety of topics that give us insight on what employees value and helps us identify where to prioritize our efforts.
At October 31, 2022, our backlog was approximately $2,550 million as compared to approximately $2,115 million at October 31, 2021, primarily driven by strong order growth, supply-chain constraints, and an increase in solution sales with a longer order-to-revenue conversion cycle, partially offset by the impact of foreign currency exchange movements.
At October 31, 2023, our backlog was approximately $2,290 million compared to approximately $2,550 million at October 31, 2022. The decrease in year-over-year backlog is a result of revenue outpacing orders, primarily driven by the fulfillment of orders and shipments with the easing of supply chain constraints along with the year-over-year decline in orders.
They serve thousands of customers across a wide range of end-user markets. They are expected to provide the same level of service and support as our direct sales force for the products they sell and generate new sales opportunities to extend our reach. Electronic commerce and telesales channels are also in place for transactional, lower-touch sales.
They are expected to provide the same level of service and support as our direct sales force for the products they sell and generate new sales opportunities to extend our reach. In addition, we work with a number of strategic solution partners who add value to our products and solutions for certain verticals like network application and test.
Our values help us attract and retain top talent and guide how we work with each other and engage with our customers, suppliers and communities. More information on the KLM can be found at https://about.keysight.com/en/companyinfo/leadership.shtml. 7 Table of Contents Operating Segments We have two reportable operating segments, the Communications Solutions Group and the Electronic Industrial Solutions Group.
More information on our broad portfolio of products and services can be found at https://www.keysight.com/us/en/products.html. Operating Segments We have two reportable operating segments, the Communications Solutions Group and the Electronic Industrial Solutions Group. Communications Solutions Group The Communications Solutions Group ("CSG") serves customers spanning the global commercial communications and aerospace, defense, and government end markets.
We fuel growth initiatives through online digital transformation, high-value content, new product launches, and sophisticated digital demand 13 Table of Contents generation programs tailored to local markets, to attract new accounts. As the world enters the post-pandemic era, we’re blending virtual and physical events to broaden our reach, while capitalizing on the benefits of physical interactions.
We fuel growth initiatives through online digital transformation, high-value content, new product launches, and sophisticated digital and physical demand generation programs tailored to local markets to attract new accounts and deepen relationships with existing customers. We continuously evolve our marketing practices and technology stack to support a data-driven approach to our sales and marketing initiatives.
The group provides electronic measurement instruments, design and test software and systems, and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment, as well as automated test software that uses artificial intelligence and machine learning to automate test creation and test execution.
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 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.
In 2022, 32.6 percent of our global external new hires were women, falling short of our 2022 goal of 35.4 percent. In 2022, 49.1 percent of external new hires in the U.S. were underrepresented minorities, exceeding our goal of 47.4 percent.
We established annual hiring goals to improve our workforce diversity. In 2023, 33.9 percent of our global external new hires were women, exceeding our 2023 goal of 33.6 percent. In 2023, 61.1 percent of external new hires in the United States were underrepresented minorities, exceeding our goal of 50.1 percent.
Prime contractors, sub-contractors and component manufacturers support the government customers by providing design and manufacturing capabilities for a variety of programs. Commercial customers include aerospace and satellite equipment manufacturers and related component suppliers.
Our aerospace, defense and government customers are research agencies and manufacturers serving the aerospace and defense industries, including commercial and government customers and their contracted suppliers. Commercial suppliers include aerospace, defense, and satellite equipment prime contractors, subcontractors, and related component suppliers.
Nersesian, 63, has served as Executive Chair of the Board of Directors since May 2022. From December 2013 to May 2022, Mr. Nersesian served as President and Chief Executive Officer of Keysight. From September 2013 to December 2013, he served as Executive Vice President of Agilent. Mr.
Jeffrey Li , 54, has served as Senior Vice President, General Counsel, and Secretary since July 2019. From December 2013 to July 2019, Mr. Li served as Vice President, Assistant General Counsel, and Assistant Secretary of Keysight, and as Senior Counsel of Agilent from 2011 to December 2013.
Our operating model incorporates a substantial amount of cost structure flexibility with the intent to be materially profitable across a range of economic and market conditions.
Durable and resilient business model Our operating model incorporates cost structure flexibility that has allowed Keysight to deliver profitability across a range of economic and market conditions. We employ variable pay mechanisms across our entire employee population and complement this with the strategic use of contingent staffing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur cash and cash equivalents are invested or held in a mix of money market funds, time deposit accounts and bank demand deposit accounts. Disruptions in the financial markets may, in some cases, result in an inability to access assets such as money market funds that traditionally have been viewed as highly liquid.
Biggest changeDisruptions in the financial markets may, in some cases, result in an inability to access assets such as money market funds that traditionally have been viewed as highly liquid. Any failure of our counterparty financial institutions or funds in which we have invested may adversely impact our cash and cash equivalent positions and, in turn, our results and financial condition.
Our income could be harmed if we are unable to adjust our purchases to market fluctuations, including those caused by global economic conditions, volatile geopolitical conflict, or the seasonal or cyclical nature of the markets in which we operate.
Our income could be harmed if we are unable to adjust our purchases to market fluctuations, including those caused by volatile global economic conditions, geopolitical conflict, or the seasonal or cyclical nature of the markets in which we operate.
If we finance acquisitions by issuing additional convertible debt or equity securities, our existing stockholders may experience share dilution, which could affect the market price of our stock. If we raise additional funds through the issuance of equity securities, our shareholders will experience dilution of their ownership interest.
If we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may experience share dilution, which could affect the market price of our stock. If we raise additional funds through the issuance of equity securities, our shareholders will experience dilution of their ownership interest.
In addition, global and regional macroeconomic developments, such as increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, volatility in capital markets, decreased liquidity, uncertain or destabilizing national election results in the U.S., Europe, and Asia, and negative changes or volatility in general economic conditions in the U.S., Europe, and Asia could negatively affect our ability to conduct business in those territories.
In addition, global and regional macroeconomic developments, such as increased unemployment, decreased income, uncertainty related to future economic activity, volatility in financial markets, reduced access to credit, increased interest rates, volatility in capital markets, decreased liquidity, uncertain or destabilizing national election results in the U.S., Europe, and Asia, and negative changes or volatility in general economic conditions in the U.S., Europe, and Asia could negatively affect our ability to conduct business in those territories.
These provisions include but are not limited to: • the inability of our shareholders to call a special meeting; • the inability of our shareholders to act without a meeting of shareholders; • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • the right of our board of directors to issue preferred stock without shareholder approval; • the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • a provision that shareholders may only remove directors with cause; • the ability of our directors, and not shareholders, to fill vacancies on our board of directors; and 32 Table of Contents • the requirement that the affirmative vote of shareholders holding at least 80 percent of our voting stock is required to amend certain provisions in our amended and restated certificate of incorporation (relating to the number, term and removal of our directors, the filling of our board vacancies, the advance notice to be given for nominations for elections of directors, the calling of special meetings of shareholders, shareholder action by written consent, the ability of the board of directors to amend the bylaws, elimination of liability of directors to the extent permitted by Delaware law, exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and amendments of the certificate of incorporation) and certain provisions in our amended and restated bylaws (relating to the calling of special meetings of shareholders, the business that may be conducted or considered at annual or special meetings, the advance notice of shareholder business and nominations, shareholder action by written consent, the number, tenure, qualifications and removal of our directors, the filling of our board vacancies, director and officer indemnification and amendments of the bylaws).
These provisions include, but are not limited to: • the inability of our shareholders to call a special meeting; • the inability of our shareholders to act without a meeting of shareholders; • rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; • the right of our board of directors to issue preferred stock without shareholder approval; • the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; • a provision that shareholders may only remove directors with cause; • the ability of our directors, and not shareholders, to fill vacancies on our board of directors; and • the requirement that the affirmative vote of shareholders holding at least 80 percent of our voting stock is required to amend certain provisions in our amended and restated certificate of incorporation (relating to the number, term and removal of our directors, the filling of our board vacancies, the advance notice to be given for nominations for elections of directors, the calling of special meetings of shareholders, shareholder action by written consent, the ability of the board of directors to amend the bylaws, elimination of liability of directors to the extent permitted by Delaware law, exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and amendments of the certificate of incorporation) and certain provisions in our amended and restated bylaws (relating to the calling of special meetings of shareholders, the business that may be conducted or considered at annual or special meetings, the advance notice of shareholder business and nominations, shareholder action by written consent, the number, tenure, qualifications and removal of our directors, the filling of our board vacancies, director and officer indemnification and amendments of the bylaws).
On December 17, 2021, Keysight and HP signed a restrictive covenant related to our Santa Rosa facility which prohibits certain uses of the property (such as running a daycare facility, hospital or school) and terminates HP’s remediation obligation related to that facility. HP’s remediation obligations relating to Keysight’s Colorado Springs facility are ongoing .
On December 17, 2021, Keysight and HP signed a restrictive covenant related to our Santa Rosa facility that prohibits certain uses of the property (such as running a daycare facility, hospital or school) and terminates HP’s remediation obligation related to that facility. HP’s remediation obligations relating to Keysight’s Colorado Springs facility are ongoing .
Our common stock is listed on the New York Stock Exchange ("NYSE") under the ticker symbol “KEYS.” The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including but not limited to: • actual or anticipated fluctuations in our operating results due to factors related to our business; • success or failure of our business strategy; • our quarterly or annual earnings, or those of other companies in our industry; • our ability to obtain third-party financing as needed; • announcements by us or our competitors of significant acquisitions or dispositions; 31 Table of Contents • changes in accounting standards, policies, guidance, interpretations or principles; • the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and share price performance of other comparable companies; • investor perception of our company; • natural or other disasters that investors believe may affect us; • overall market fluctuations; • results from any material litigation or government investigations; • changes in laws or regulations affecting our business; • new or expanded trade restrictions; • economic conditions such as inflation or recession; • geopolitical conflicts; and • other external factors.
Our common stock is listed on the New York Stock Exchange ("NYSE") under the ticker symbol “KEYS.” The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including, but not limited to: • actual or anticipated fluctuations in our operating results due to factors related to our business; • success or failure of our business strategy; • our quarterly or annual earnings, or those of other companies in our industry; • our ability to obtain third-party financing as needed; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • the failure of securities analysts to cover our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and share price performance of other comparable companies; • investor perception of our company; • natural or other disasters that investors believe may affect us; • overall market fluctuations; • results from any material litigation or government investigations; • changes in laws or regulations affecting our business; • new or expanded trade restrictions; • economic conditions such as inflation or recession; • geopolitical conflicts; and • other external factors.
Industry consolidation and consolidation among our customer base may lead to increased competition and may harm our operating results. There is potential for industry consolidation in our markets. As companies attempt to strengthen or hold their market positions in an evolving industry, companies could be acquired or may be unable to continue operations.
Industry consolidation and consolidation among our customer base may lead to increased competition and may harm our operating results. There is potential for industry consolidation in our markets. As companies attempt to expand, strengthen or hold their market positions in an evolving industry, companies could be acquired or may be unable to continue operations.
Our ability to offer new solutions and services and to deploy them in a timely manner depend on several factors, including but not limited to our ability to: • properly identify and assess customer needs; • innovate and develop new technologies, services and applications; • successfully commercialize new technologies in a timely manner; 22 Table of Contents • manufacture and deliver our solutions in sufficient volumes and on time; • differentiate our offerings from our competitors' offerings; • price our solutions competitively; • anticipate our competitors' development of new solutions, services or technological innovations; and • control product quality in our manufacturing process.
Our ability to offer new solutions and services and to deploy them in a timely manner depend on several factors, including, but not limited to, our ability to: • properly identify and assess customer needs; • innovate and develop new technologies, services and applications; • successfully commercialize new technologies in a timely manner; • manufacture and deliver our solutions in sufficient volumes and on time; • differentiate our offerings from our competitors' offerings; • price our solutions competitively; • anticipate our competitors' development of new solutions, services or technological innovations; and 19 Table of Contents • control product quality in our manufacturing process.
Depending on the size and complexity of an acquisition, the successful integration of the entity depends on a variety of factors, including but not limited to: • the achievement of anticipated cost savings, synergies, business opportunities and growth prospects from combining the acquired company; • the scalability of production, manufacturing and marketing of products of a newly acquired company to broader adjacent markets; • the ability to cohesively integrate operations, product definitions, price lists, contract terms and conditions, delivery, and technical support for products and solutions of a newly acquired company into our existing operations; • the compatibility of our infrastructure, operations, policies and organizations with those of the acquired company; • the retention of key employees and/or customers; • the management of facilities and employees in different geographic areas; and • the management of relationships with our strategic partners, suppliers, and customer base.
Depending on the size and complexity of an acquisition, the successful integration of the entity depends on a variety of factors, including but not limited to: • the achievement of anticipated cost savings, synergies, business opportunities and growth prospects from combining the acquired company; • the scalability of production, manufacturing and marketing of products of a newly acquired company to broader adjacent markets; 21 Table of Contents • the ability to cohesively integrate operations, product definitions, price lists, contract terms and conditions, delivery, and technical support for products and solutions of a newly acquired company into our existing operations; • the compatibility of our infrastructure, operations, policies and organizations with those of the acquired company; • the retention of key employees and/or customers; • the management of facilities and employees in different geographic areas; and • the management of relationships with our strategic partners, suppliers, and customer base.
Appropriate targets for acquisition are difficult to identify and complete for a variety of reasons, including but not limited to, limited due diligence, high valuations, business and intellectual property evaluations, other interested parties, negotiations of the definitive documentation, satisfaction of closing conditions, the need to obtain antitrust or other regulatory approvals on acceptable terms, and availability of funding.
Appropriate targets for acquisition are difficult to identify and complete for a variety of reasons, including, but not limited to, limited due diligence, high valuations, difficulty obtaining business and intellectual property evaluations, other interested parties, negotiations of the definitive documentation, satisfaction of closing conditions, the need to obtain antitrust or other regulatory approvals on acceptable terms, and availability of funding.
Furthermore, some of our intellectual property is licensed to others, which allows them to compete with us using that intellectual property. If we experience a significant cybersecurity attack or disruption in our IT systems, our business, reputation, and operating results could be adversely affected.
Furthermore, some of our intellectual property is licensed to others, which allows them to compete with us using that intellectual property. If we experience a significant cybersecurity attack or disruption in our IT systems or our software products, our business, reputation, and operating results could be adversely affected.
The continued evolution of COVID-19 and its variants, as well as periodic spikes in infection rates, local outbreaks on our sites or supplier, customer or vendor sites, in spite of safety measures or vaccinations, could cause disruptions to our operations or those of our suppliers, customers or vendors.
For example, the continued evolution of COVID-19 and its variants, as well as periodic spikes in infection rates, local outbreaks on our sites or supplier, customer or vendor sites, in spite of safety measures or vaccinations, could cause disruptions to our operations or those of our suppliers, customers or vendors.
Due to the complexity of tax contingencies, the ultimate resolution of any tax matters related to operations may result in payments greater or less than amounts accrued. Our operations may be adversely impacted by changes in our business mix or changes in the tax legislative landscape.
Due to the complexity of tax contingencies, the ultimate resolution of any tax matters related to operations may result in payments greater or less than amounts accrued. Our effective tax rate may be adversely impacted by changes in our business mix or changes in the tax legislative landscape.
In addition, the indenture governing our senior notes contains covenants that may adversely affect our ability to incur certain liens. If we breach any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, our outstanding indebtedness could be declared immediately due and payable.
In addition, the indenture governing our senior notes contains covenants that may adversely affect our ability to incur certain liens. If we breach 22 Table of Contents any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, our outstanding indebtedness could be declared immediately due and payable.
We are also regulated under a 29 Table of Contents number of international, federal, state and local laws regarding recycling, product packaging and product content requirements. We apply strict standards for protection of the environment and occupational health and safety inside and outside the United States, even where not subject to regulation imposed by foreign governments.
We are also regulated under a number of international, federal, state and local laws regarding recycling, product packaging and product content requirements. We apply strict standards for protection of the environment and occupational health and safety inside and outside the United States, even where not subject to regulation imposed by foreign governments.
We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of the company, which could decrease the trading price of our common stock.
We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. 29 Table of Contents Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of the company, which could decrease the trading price of our common stock.
Accordingly, our future results could be harmed by a variety of factors, including but not limited to: • inability to conduct business in certain countries or regions or with certain customers due to U.S. sanctions or trade restrictions; • inability to sell certain products, technologies, or services to countries, regions, facilities, or customers due to U.S. sanctions or trade restrictions; • changes in a specific country's or region's political, economic or other conditions, including but not limited to changes that favor national interests and economic volatility; 20 Table of Contents • negative impact of a country’s response to, or an imposed reduction in economic activity and other economic and political measures taken to contain the spread of global pandemic conditions; • negative consequences from changes in tax laws; • difficulty in protecting intellectual property; • injunctions or exclusion orders related to intellectual property disputes; • interruptions to transportation flows for delivery of parts to us and finished goods to our customers; • changes in foreign currency exchange rates; • difficulty in staffing and managing foreign operations; • local competition; • differing labor regulations; • unexpected changes in regulatory requirements; • inadequate local infrastructure; • potential incidences of corruption and fraudulent business practices; and • volatile geopolitical turmoil, including popular uprisings, regional conflicts, terrorism, and war.
Accordingly, our future results could be harmed by a variety of factors, including, but not limited to: • inability to conduct business in certain countries or regions or with certain customers due to U.S. sanctions or trade restrictions; • inability to sell certain products, technologies, or services to countries, regions, facilities, or customers due to U.S. sanctions or trade restrictions; • changes in a specific country's or region's political, economic or other conditions, including but not limited to changes that favor national interests and economic volatility; • negative impact of economic and political measures taken by a country to contain the spread of global pandemic conditions; • negative consequences from changes in tax laws; • difficulty in protecting intellectual property; • injunctions or exclusion orders related to intellectual property disputes; • interruptions to transportation flows for delivery of parts to us and finished goods to our customers; • changes in foreign currency exchange rates; 17 Table of Contents • difficulty in staffing and managing foreign operations; • local competition; • differing labor regulations; • unexpected changes in regulatory requirements; • inadequate local infrastructure; • potential incidences of corruption and fraudulent business practices; and • volatile geopolitical turmoil, including popular uprisings, regional conflicts, terrorism, and war.
Changes in tax laws, such as tax reform in the United States or changes in tax laws resulting from the Organization for Economic Co-operation and Development’s (“OECD”) multi-jurisdictional plan of action to address “base erosion and profit shifting” and the taxation of the “Digital Economy” could impact our effective tax rate.
Changes in tax laws, such as tax reform in the United States or changes in tax laws resulting from the Organization for Economic Co-operation and Development’s (“OECD”) multi-jurisdictional plan of action to address “base erosion and profit shifting” and the taxation of the “Digital Economy,” could impact our effective tax rate.
A future adverse ruling, settlement or unfavorable development could result in charges that could adversely affect our business, operating results or financial condition. Our internal controls may be determined to be ineffective, which may adversely affect investor confidence in our company, the value of our stock, and our access to capital.
A future adverse ruling, settlement or unfavorable development could result in charges that could adversely affect our business, operating results or financial condition. 27 Table of Contents Our internal controls may be determined to be ineffective, which may adversely affect investor confidence in our company, the value of our stock, and our access to capital.
As new variants of the virus appear, especially variants that are more easily spread, cause more serious outcomes, or are resistant to existing vaccines, new health orders and safety protocols could further impact our on-site operations and our ability to manufacture, ship or deliver products and solutions to customers.
As new variants of viruses appear, especially variants that are more easily spread, cause more serious outcomes, or are resistant to existing vaccines, new health orders and safety protocols could further impact our on-site operations and our ability to manufacture, ship or deliver products and solutions to customers.
We are currently devoting significant resources to new technologies in the communications, automotive, battery, Internet of Things, and mobile industries. We are investing in R&D, developing relationships with customers and suppliers, and re-directing our corporate and operational resources to grow within these innovative technologies.
We are currently devoting significant resources to new technologies in the communications, aerospace and defense, automotive, Internet of Things, and mobile industries. We are investing in R&D, developing relationships with customers and suppliers, and re-directing our corporate and operational resources to grow within these innovative technologies.
We may have difficulty developing, manufacturing and 24 Table of Contents marketing the products of a newly acquired company in a way that enhances performance and expands the markets of the newly acquired company. The acquired company may not enhance the performance of our businesses or product lines such that we do not realize the value from expected synergies.
We may have difficulty developing, manufacturing and marketing the products of a newly acquired company in a way that enhances performance and expands the markets of the newly acquired company. The acquired company may not enhance the performance of our businesses or product lines such that we do not realize the value from expected synergies.
Our incurrence of this debt, and increases in our aggregate levels of debt, may adversely affect our operating results and financial condition by, among other things: • requiring a portion of our cash flow from operations to make interest payments on this debt; 25 Table of Contents • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; and • limiting our flexibility in planning for, or reacting to, changes in our business and the industry.
Our incurrence of debt, and increases in our aggregate levels of debt, may adversely affect our operating results and financial condition by, among other things: • requiring a portion of our cash flow from operations to make interest payments on outstanding debt; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; and • limiting our flexibility in planning for, or reacting to, changes in our business and the industry.
Although we deny the allegations and intend to aggressively defend each case, the outcome of existing proceedings, lawsuits and claims may differ from our expectations because the outcomes of litigation are often difficult to reliably predict.
Although we deny the allegations and are aggressively defending each case, the outcome of existing proceedings, lawsuits and claims may differ from our expectations because the outcomes of litigation are often difficult to reliably predict.
Our effective tax rate may be adversely impacted by, among other things, changes in the mix of our earnings among countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets, and changes in tax 28 Table of Contents laws.
Our effective tax rate may be adversely impacted by, among other things, changes in the mix of our earnings among countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets, and changes in tax laws.
These regulations are complex, change frequently and may become more stringent over time. We have been required to incur significant expenses to comply with these regulations and to remedy violations of certain import/export regulations.
These regulations are complex, change frequently and may become more stringent over time. We have been required to incur significant expenses to comply with these regulations and to remedy violations of certain import/export 26 Table of Contents regulations.
Although we deny the allegations and intend to aggressively defend each case, the outcome of existing proceedings, lawsuits and claims may differ from our expectations because the outcomes of litigation are often difficult to reliably predict.
Although we deny the allegations and are aggressively defending each case, the outcome of existing proceedings, lawsuits and claims may differ from our expectations because the outcomes of litigation are often difficult to reliably predict.
Intellectual property rights and our ability to enforce them may be unavailable or limited in some countries, which could make it easier for competitors to infringe our intellectual property rights, capture market share and could result in lost revenues to the company.
Intellectual property rights and our ability 25 Table of Contents to enforce them may be unavailable or limited in some countries, which could make it easier for competitors to infringe our intellectual property rights, capture market share and could result in lost revenues to the company.
In addition, some of the parts that require custom design are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Should a supplier cease manufacturing such a component, we would be forced to re-engineer our solution.
Some parts require custom design and may not be readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Should a supplier cease manufacturing such a component, we would be forced to re-engineer our solution.
Recent escalation in regional conflicts, including the Russian invasion of Ukraine, which resulted in economic sanctions, and the risk of increased tensions between China and Taiwan, could limit or prohibit our ability to transfer certain technologies, to sell our products and solutions, and could result in closure of facilities in sanctioned countries, such as our recent decision to discontinue operations in Russia.
Regional conflicts, including the Russian invasion of Ukraine, which resulted in economic sanctions and the decision to discontinue our operations in Russia, the war between Israel and Hamas, and the risk of increased tensions between China and Taiwan, could limit or prohibit our ability to transfer certain technologies, to sell our products and solutions, and could result in additional closure of facilities in sanctioned countries.
Global and regional economic uncertainty, inflation, recession or depression may impact our business, resulting in: • increased cost to manufacture products or deliver solutions; • reduced customer purchasing power; • reduced demand for our solutions, delays in the shipment of orders or increases in order cancellations; • increased risk of excess and obsolete inventory; • increased price pressure for our solutions and services; and • greater risk of impairment to the value, and a detriment to the liquidity, of our future investment portfolio.
Global and regional economic uncertainty, inflation, potential recession or depression has and may continue to impact our business, resulting in: • increased cost to manufacture products or deliver solutions; • reduced customer purchasing power; • reduced demand for our solutions and services and reduced or delayed orders; • increased risk of excess and obsolete inventory; • increased price pressure for our solutions and services; and • greater risk of impairment to the value, and a detriment to the liquidity, of our future investment portfolio.
However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of the company and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of the company and our shareholders.
However, due to the uncertainties and volatile economic environment created by increased geopolitical tensions, including the war between Russia and Ukraine, the impact of inflation, the potential for future recession, and continued supply chain challenges, the markets we serve may experience increased volatility and may not experience the seasonality or cyclicality that we expect.
However, due to the uncertainties and volatile economic environment created by inflation, the potential for recession, increased geopolitical tensions, including regional conflict and war and continued supply chain challenges, the markets we serve may experience increased volatility and may not experience the seasonality or cyclicality that we expect.
Our amended and restated certificate of incorporation designates that the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against the company and our directors and officers.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. 30 Table of Contents Our amended and restated certificate of incorporation designates that the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against the company and our directors and officers.
Making such estimations in an economic climate affected by inflation or recession, fluctuations in global currency, geopolitical tension and war is particularly difficult as increased volatility may impact seasonal trends making it more difficult to anticipate demand fluctuations.
Making such estimations in an economic climate affected by inflation or potential recession, fluctuations in global currency, geopolitical tension and war is particularly difficult as increased volatility may impact seasonal trends making it more difficult to anticipate demand fluctuations. Supply chain fluctuations could impact our ability to purchase parts and components.
Although our policy is to apply strict standards for environmental protection at our sites inside and outside the United States, even if the sites outside the United States are not subject to regulations imposed by foreign governments, we may not be aware of all conditions that could subject us to liability.
Although our policy is to apply strict standards for environmental protection at our sites inside and outside the United States, even if the sites outside the United States are not subject to regulations imposed by foreign governments, we may not be aware of all conditions that could subject us to liability. 28 Table of Contents Risks Related to Our Common Stock Our share price may fluctuate significantly.
Dollars, although many of our solutions are priced in local currencies and a significant amount of certain types of expenses, such as payroll, utilities, tax and marketing expenses, are paid in local currencies.
Dollars, although many of our solutions are priced in local currencies and a significant amount of certain types of expenses, such as payroll, utilities, tax and marketing expenses, are paid in local currencies and could be impacted by significant currency exchange rate fluctuations.
Our financial results and tax treatment are susceptible to changes in tax, accounting, and other laws, regulations, principles, and interpretations in the United States and in other jurisdictions where we do business.
Our financial results and tax treatment are susceptible to changes in tax, accounting, and other laws, including the Inflation Reduction Act and The Tax Cuts and Jobs Act in the U.S, regulations, principles, and interpretations in the United States and in other jurisdictions where we do business.
To the extent that such disruptions occur, our customers and partners may lose confidence in our solutions and we may lose business or brand reputation, resulting in a material and adverse effect on our business operating results and financial condition.
To the extent that such disruptions occur, our customers and partners may lose confidence in our solutions, and we may lose business or brand reputation, resulting in a material and adverse effect on our business operating results and financial condition. Our business will suffer if we are not able to retain and hire key personnel.
If we cannot or do not wish to satisfy all or portions of the tax incentives conditions, we may lose the related tax incentives and could be required to refund the benefits that the tax incentives previously provided. The Singapore tax incentive is due for renewal in 2024, and the Malaysia incentive is due for renewal in 2025.
If we cannot or do not wish to satisfy all or portions of the tax incentives conditions, we may lose the related tax incentives and could be required to refund the benefits that the tax incentives previously provided.
A decreased demand for our customers’ products or trade restrictions could adversely affect our results of operations. Our business depends on our customers’ ability to manufacture, design, and sell their products in the marketplace. International trade disputes affecting our customers could adversely affect our business.
Our business depends on our customers’ ability to manufacture, design, and sell their products in the marketplace. International trade disputes affecting our customers could adversely affect our business.
In addition, international conflict has resulted in increased pressure on the supply chain and could further result in increased energy costs, which could increase the cost of manufacturing, selling and delivering products and solutions; inflation, which could result in increases in the cost of manufacturing products and solutions, reduced customer purchasing power, increased price pressure, and reduced or cancelled orders; increased risk of cybersecurity attacks; and market instability, which could adversely impact our financial results.
In addition, international conflict has resulted in increased pressure on the supply chain and could further result in increased energy costs, which could increase the cost of manufacturing, selling and delivering products and solutions; inflation, which has resulted in increases in the cost of manufacturing products and solutions, reduced customer purchasing power, increased price pressure, and reduced or cancelled orders; increased risk of cybersecurity attacks; and market instability, which could adversely impact our financial results. 18 Table of Contents Our operating results and financial condition could be harmed if the markets into which we sell our solutions decline or do not grow as anticipated.
Uncertainty in general economic conditions may adversely affect our operating results and financial condition. Our business is sensitive to negative changes in general economic conditions, both inside and outside the United States.
Item 1A. Risk Factors Risks, Uncertainties and Other Factors That May Affect Future Results Risks Related to Our Business Uncertainty in general economic conditions may adversely affect our operating results and financial condition. Our business is sensitive to negative changes in general economic conditions, both inside and outside the United States.
Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand is lower than our expectations, our manufacturing capacity will likely exceed our production requirements.
Our operating results may suffer if our manufacturing capacity does not match the demand for our solutions. Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand is lower than our expectations, our manufacturing capacity will likely exceed our production requirements.
We sponsor several defined benefit pension plans that cover many of our salaried and hourly employees. The Federal Pension Protection Act of 2006 requires that certain capitalization levels be maintained in each of the U.S. plans, and there may be similar funding requirements in the plans outside the United States.
The Federal Pension Protection Act of 2006 requires that certain capitalization levels be maintained in each of the U.S. plans, and there may be similar funding requirements in the plans outside the United States.
The pandemic has led to global supply chain challenges, which have adversely 21 Table of Contents impacted our ability to procure certain components and could impact our ability to manufacture products and cause delays in delivery of our solutions to our customers.
Pandemic conditions could lead to global supply chain challenges, which could adversely impact our ability to procure certain components and could impact our ability to manufacture products and cause delays in delivery of our solutions to our customers.
In some circumstances, we may choose to not pursue enforcement due to a variety of reasons. In addition, competitors may avoid infringement by designing around our intellectual property rights or by developing non-infringing competing technologies.
Our competitive position may be harmed if we cannot detect infringement and enforce our intellectual property rights in a timely manner, or at all. In some circumstances, we may choose to not pursue enforcement due to a variety of reasons. In addition, competitors may avoid infringement by designing around our intellectual property rights or by developing non-infringing competing technologies.
If currency exchange rates fluctuate substantially in the future, our financial results could be adversely affected. A substantial amount of our solutions are priced and paid for in U.S.
Volatility in currency exchange rates could adversely impact our financial results. A substantial amount of our solutions are priced and paid for in U.S.
In addition to the risks outlined above, problems with manufacturing or IT outsourcing could result in lower revenues and unrealized efficiencies and could impact our results of operations and stock price.
In addition to the risks outlined above, problems with manufacturing or IT outsourcing could result in lower revenues and unrealized efficiencies and could impact our results of operations and stock price. Much of our outsourcing takes place in developing countries and, as a result, may be subject to geopolitical uncertainty.
In such an environment, pricing pressures could intensify. Since a significant portion of our operating expenses is relatively fixed in nature due to sales, R&D and manufacturing costs, if we were unable to respond quickly enough, these pricing pressures could further reduce our operating margins.
Since a significant portion of our operating expenses is relatively fixed in nature due to sales, R&D and manufacturing costs, if we were unable to respond quickly enough, these pricing pressures could further reduce our operating margins. A decreased demand for our customers’ products or trade restrictions could adversely affect our results of operations.
If any of these facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility.
For example, our production facilities, headquarters and laboratories in California and our production facilities in Japan are all located in areas with above-average seismic activity. If any of these facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility.
Our quarterly sales and operating results are highly dependent on the volume and timing of technology-related spending and orders received during the fiscal quarter, which are difficult to forecast and may be cancelled by our customers. In addition, our revenues and earnings forecasts for future fiscal quarters are often based on the expected seasonality or cyclicality of our markets.
Visibility into our markets is limited. Our quarterly sales and operating results are highly dependent on the volume and timing of technology-related spending and orders received during the fiscal quarter, which are difficult to forecast and may be cancelled by our customers.
This could also result in loss or damage to employee homes, employees relocating to other parts of the country or being unwilling to relocate to the strategic locations, housing shortages and loss of or inability to recruit key employees, This could result in adverse impact to the available workforce, damage to or destruction of inventory, inability to manufacture and deliver solutions, cancellation of orders, and breaches of customer contracts leading to reduced revenue.
This could also result in loss or damage to employee homes, employees relocating to other parts of the country or being unwilling to relocate to strategic locations, housing shortages and loss of or inability to recruit key employees.
Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock or on our access to capital, or cause us to be subject to investigation or sanctions by the SEC. 30 Table of Contents Adverse conditions in the global banking industry and credit markets may adversely impact the value of our cash investments or impair our liquidity.
Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock or on our access to capital, or cause us to be subject to investigation or sanctions by the SEC.
Any decline in our customers' markets would likely result in a reduction in demand for our solutions and services. If our customers' markets decline, we may not be able to collect on outstanding amounts due to us. Such declines could harm our financial position, results of operations, cash flows and stock price, and could limit our profitability.
Any decline in our customers' markets would likely result in a reduction in demand for our solutions and services. If our customers' markets decline, orders may decline, may be delayed or cancelled, and we may not be able to collect on outstanding amounts due to us.
Volatile changes in weather conditions and effects of climate change could damage or destroy strategic facilities, including our headquarters, which could have a significant negative impact on our operations. We and our customers and suppliers are vulnerable to the increasing impact of climate change.
These factors could materially and negatively impact our business results, operations, revenue, growth and overall financial condition. Volatile changes in weather conditions and effects of climate change could damage or destroy strategic facilities, including our headquarters, which could have a significant negative impact on our operations.
If our third-party insurance coverage is adversely affected, or to the extent we have elected to self-insure, we may be at a greater risk that our operations will be harmed by a catastrophic loss. 26 Table of Contents Our commitment to Net Zero emissions in company operations by Fiscal Year 2040 will be subject to significant costs and regulations which could impact business operations, processes, revenue, and reputation.
If our third-party insurance coverage is adversely affected, or to the extent we have elected to self-insure, we may be at a greater risk that our operations will be harmed by a catastrophic loss.
In addition, our patents, copyrights, trademarks and other intellectual property rights may not provide us with a significant competitive advantage. In preparation for the separation and 27 Table of Contents distribution, we applied for trademarks related to new global brand name in various jurisdictions worldwide.
In addition, our patents, copyrights, trademarks and other intellectual property rights may not provide us with a significant competitive advantage. We have applied for trademarks related to our global brand name in various jurisdictions worldwide. Any successful opposition to our applications in material jurisdictions could impose material costs on us or make it more difficult to protect our brand.
Volatile changes in weather conditions, including extreme heat or cold, could increase the risk of wildfires, floods, blizzards, hurricanes and other weather-related disasters. Such extreme weather events can cause power outages and network disruptions that may result in disruption to operations and may impact our ability to manufacture and ship product, which may negatively impact revenue.
Such extreme weather events can cause power outages and network disruptions that may result in disruption to operations and may impact our ability to manufacture and ship products, which may negatively impact revenue.
If we suffer a loss to our employees, factories, facilities or distribution system due to a catastrophic event, our operations could be significantly harmed. Our factories, facilities and distribution system are vulnerable to catastrophic loss due to natural or man-made disasters.
Our factories, facilities and distribution system are vulnerable to catastrophic loss due to natural or man-made disasters. Several of our facilities could be subject to a catastrophic loss caused by earthquake or other natural disasters due to their locations.
Key customers or large orders may expose us to additional business and legal risks that could have a material adverse impact on our operating results and financial condition . As a global company, we have key customers all over the world, although no one customer makes up more than 10 percent of our revenue.
As a global company, we have key customers all over the world, although no one customer makes up more than 10 percent of our revenue.
The company also committed in September 2021 to developing approved science-based targets in line with limiting global warming to 1.5 degrees Celsius above pre-industrial levels.
The company plans to meet this commitment by reducing energy consumption through efficiency and conservation measures, investments in renewable energy and selective purchase of certified offsets for residual emissions. The company also committed in September 2021 to developing approved science-based targets in line with limiting global warming to 1.5 degrees Celsius above pre-industrial levels.
We may be required to spend significant resources monitoring our intellectual property rights, and we may or may not be able to detect infringement of such rights by third parties. Our competitive position may be harmed if we cannot detect infringement and enforce our intellectual property rights in a timely manner, or at all.
Different jurisdictions vary widely in the level of protection and priority they give to trademark and other intellectual property rights. We may be required to spend significant resources monitoring our intellectual property rights, and we may or may not be able to detect infringement of such rights by third parties.
Any failure of our counterparty financial institutions or funds in which we have invested may adversely impact our cash and cash equivalent positions and, in turn, our results and financial condition. Future investment returns on pension assets may be lower than expected or interest rates may decline, requiring us to make significant additional cash contributions to our future plans.
Future investment returns on pension assets may be lower than expected or interest rates may decline, requiring us to make significant additional cash contributions to our future plans. We sponsor several defined benefit pension plans that cover many of our salaried and hourly employees.
In addition to Scope 1 and Scope 2 emissions defined by our net zero goal, the company will develop Scope 3 reduction and engagement targets across relevant categories as part of our commitment to science-based targets. The development and implementation of goals and targets may require significant and expensive capital improvements, changes in product development, manufacturing processes and shipping methods.
In addition to Scope 1 and Scope 2 emissions defined by our net zero goal, the company has developed Scope 3 reduction and engagement targets across relevant categories as part of our commitment to science-based targets, which were approved by Science Based Target Initiative ("SBTi") on October 27, 2023.
We are a global company with international operations, and we sell our products and solutions in countries throughout the world.
Volatile geopolitical turmoil, including popular uprisings, regional conflicts, terrorism and war could result in market instability, which could negatively impact our business results. We are a global company with international operations, and we sell our products and solutions in countries throughout the world.
This inability could materially and adversely limit our ability to improve our income, margin and operating results. By contrast, if, during an economic downturn, we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity would adversely affect our income, margins and operating results.
By contrast, if, during an economic downturn, we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity would adversely affect our income, margins and operating results. 20 Table of Contents Key customers or large orders may expose us to additional business and legal risks that could have a material adverse impact on our operating results and financial condition .
As a result, our effective tax rate could be higher than it would have been had we maintained the benefits of the tax incentives and could harm our operating results after tax. Our business will suffer if we are not able to retain and hire key personnel.
We cannot guarantee that we will qualify for any new incentive regime that may exist going forward. As a result, our effective 23 Table of Contents tax rate could be higher than it would have been had we renewed the tax incentives and could harm our operating results after tax.
In May 2021, the company disclosed its commitment to achieving net zero Scope 1 and Scope 2 emissions by the end of fiscal year 2040. The company plans to meet this commitment by reducing energy consumption through efficiency and conservation measures, investments in renewable energy and selective purchase of certified offsets for residual emissions.
Our commitment to net zero emissions in company operations by fiscal year 2040 will be subject to significant costs and regulations, which could impact business operations, processes, revenue, and reputation. In May 2021, the company disclosed its commitment to achieving net zero Scope 1 and Scope 2 emissions by the end of fiscal year 2040.
Based on the current tax environment, we believe that we will satisfy such conditions in the future as needed, but cannot guarantee that the tax environment will not change or that such conditions will be satisfied.
We believe that we will satisfy such conditions, but cannot guarantee that the tax environment will not change or that such conditions will be satisfied. The Singapore tax incentive expires July 31, 2024, and the Malaysia incentive expires October 31,2025. Our taxes could increase if the existing Singapore or Malaysia incentives are revoked or are not renewed upon expiration.
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Item 1A. Risk Factors Risks, Uncertainties and Other Factors That May Affect Future Results Risks Related to Our Business Volatile geopolitical turmoil, including popular uprisings, regional conflicts, terrorism and war could result in market instability, which could negatively impact our business results.
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In addition, our revenues and earnings forecasts for future fiscal quarters are often based on the expected seasonality or cyclicality of our markets.
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These factors could materially and negatively impact our business results, operations, revenue, growth and overall financial condition. Our operating results and financial condition could be harmed if the markets into which we sell our solutions decline or do not grow as anticipated. Visibility into our markets is limited.
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Such declines could harm our financial position, results of operations, cash flows and stock price, and could limit our profitability. In such an environment, pricing pressures could intensify.
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Additionally, the current disruption to the global supply chain has impacted our ability to purchase parts and components to meet increasing product demand, which has increased lead times, delayed shipments and could materially affect our results. We have seen a shortage of parts for some of our products.
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This inability could materially and adversely limit our ability to improve our income, margin and operating results.
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Much of our outsourcing takes place in developing countries and, as a result, may be subject to geopolitical uncertainty. 23 Table of Contents Our operating results may suffer if our manufacturing capacity does not match the demand for our solutions.
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Any changes to the positions we have taken could result in an impact to our financial statements.
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Several of our facilities could be subject to a catastrophic loss caused by earthquake or other natural disasters due to their locations. For example, our production facilities, headquarters and laboratories in California and our production facilities in Japan are all located in areas with above-average seismic activity.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of October 31, 2022, we own or lease approximately 5.6 million square feet (a) of space worldwide, a summary of which is provided below: Total square feet (in millions) Owned facilities 3.5 Leased facilities 2.1 Total 5.6 Occupancy of our facilities Manufacturing plants, R&D facilities and warehouse and administrative facilities 5.3 Sales facilities 0.3 Total 5.6 (a) Excludes 0.6 million square feet of vacated space, all of which is leased to third parties.
Biggest changeAs of October 31, 2023, we own or lease approximately 5.4 million square feet (a) of space worldwide, a summary of which is provided below: Total square feet (in millions) Owned facilities 3.5 Leased facilities 1.9 Total 5.4 Occupancy of our facilities Manufacturing plants, R&D facilities and warehouse and administrative facilities 5.2 Sales facilities 0.2 Total 5.4 (a) Excludes 0.8 million square feet of vacated space, all of which is leased to third parties or is in restructuring.
These facilities are primarily located in the following countries: United States, Malaysia, Japan, China, Germany, India, Taiwan, United Kingdom, Spain, Singapore, Romania, and Italy.
These facilities are primarily located in the following countries: United States, Malaysia, Japan, China, Germany, India, United Kingdom, Taiwan, Spain, Korea, Singapore, and Romania.
All of these facilities are well maintained and suitable for the operations conducted in them. 34 Table of Contents
All of these facilities are well maintained and suitable for the operations conducted in them. 32 Table of Contents
Item 2. Properties Our executive offices are located in the United States in an owned facility in Santa Rosa, California. We own or lease 139 operating facilities located throughout the world that handle manufacturing production, R&D, administration, assembly, sales, quality, assurance testing, distribution and packaging of our products.
Item 2. Properties Our executive offices are located in the United States in an owned facility in Santa Rosa, California. We own or lease 134 operating facilities located throughout the world that handle manufacturing, research and development, administration, assembly, sales, quality, assurance testing, distribution, and packaging of our products.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe deny the allegations and intend to aggressively defend each case. Although there are no matters pending that we currently believe are probable and reasonably possible of having a material impact to our business, consolidated financial position, or results of operations or cash flows, the outcome of litigation is inherently uncertain and is difficult to predict.
Biggest changeWe deny the allegations and are aggressively defending each case. Although there are no matters pending that we currently believe are probable and reasonably possible of having a material impact to our business, consolidated financial position, or results of operations or cash flows, the outcome of litigation is inherently uncertain and is difficult to predict.
Pursuant to the Consent Agreement, we were assessed a penalty of $6.6 million to be paid over three years, $2.5 million of which was suspended and designated for remediation activities over three years, including employment of a special compliance officer. To date, we have paid $2.1 million of the penalty.
Pursuant to the Consent Agreement, we were assessed a penalty of $6.6 million to be paid over three years, $2.5 million of which was suspended and designated for remediation activities over three years, including employment of a special compliance officer. To date, we have paid $3.1 million of the penalty.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares of Common Stock Purchased (1) Weighted Average Price Paid per Share of Common Stock (2) Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Program (1) August 1, 2022 through August 31, 2022 — — — $476,957,554 September 1, 2022 through September 30, 2022 605,322 $159.20 605,322 $380,592,418 October 1, 2022 through October 31, 2022 190,531 $157.31 190,531 $350,619,747 Total 795,853 795,853 (1) On November 18, 2021, our board of directors approved a stock repurchase program authorizing the purchase of up to $1,200 million of the company’s common stock, replacing the previously approved November 2020 program, under which $77 million remained.
Biggest changePeriod Total Number of Shares of Common Stock Purchased (1) Weighted Average Price Paid per Share of Common Stock (2) Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Program (1) August 1, 2023 through August 31, 2023 898,933 $ 130.15 898,933 $ 1,232,832,479 September 1, 2023 through September 30, 2023 1,388,703 $ 132.50 1,388,703 $ 1,048,835,548 October 1, 2023 through October 31, 2023 985,676 $ 126.82 985,676 $ 923,835,624 Total 3,273,312 3,273,312 (1) On March 6, 2023, our board of directors approved a new stock repurchase program authorizing the purchase of up to $1,500 million of the company’s common stock, replacing the previously approved November 2021 program authorizing the purchase of up to $1,200 million of the company’s common stock, of which $225 million remained.
Under our stock repurchase program, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. All such shares and related costs are held as treasury stock and accounted for at the trade date using the cost method.
Under our stock repurchase program, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions, or other means. All such shares and related costs are held as treasury stock and accounted for at trade date using the cost method.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange ("NYSE") with the ticker symbol "KEYS.’’ There were 17,025 shareholders of record of Keysight common stock as of December 12, 2022.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange ("NYSE") with the ticker symbol "KEYS.’’ As of December 12, 2023, there were 16,230 shareholders of record.
The total number of shares of common stock purchased by the company during the fiscal year ended October 31, 2022 is 5,442,280 shares.
The total number of shares of common stock purchased by the company during the fiscal year ended October 31, 2023 was 4,913,548 shares.
The information required by this item with respect to equity compensation plans will be included under the caption Equity Compensation Plans in our proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, and is incorporated herein by reference.
The information required by this item with respect to equity compensation plans will be included under the caption "Equity Compensation Plans" in our proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, and is incorporated herein by reference. 34 Table of Contents Issuer Purchases Of Equity Securities The table below summarizes information about the company’s purchases, based on trade date, of its equity securities registered pursuant to Section 12 of the Exchange Act during the fiscal quarter ended October 31, 2023.
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ISSUER PURCHASES OF EQUITY SECURITIES The table below summarizes information about the company’s purchases, based on trade date, of its equity securities registered pursuant to Section 12 of the Exchange Act during the fiscal quarter ended October 31, 2022.
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Stock Price Performance Graph The following graph compares the cumulative 5-year total stockholder return on our common stock relative to the cumulative total return of the S&P 500 Index and the S&P 500 Information Technology Index.
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The graph assumes that the value of the investment in our common stock and in each index on October 31, 2018 (including reinvestment of dividends) was $100 and tracks it each year thereafter on the last day of our fiscal year through October 31, 2023. The historical performance set forth below is not indicative of future stock price performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis report contains forward-looking statements including, without limitation, statements regarding 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 local government regulations on our ability to pay vendors or 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, our transition to lower-cost regions, the existence of political or economic instability, impacts of geopolitical tension and conflict in regions outside of the U.S., including the war between Russia and Ukraine and the risk of increased tensions between China and Taiwan, 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, inflationary pressures, continued impacts to the supply chain, impacts related to endemic and pandemic conditions, impacts related to net zero emissions commitments, the impact of volatile weather caused by environmental conditions such as climate change, increases in attrition and our ability to retain key personnel, and our estimated or anticipated future results of operations, which involve risks and uncertainties.
Biggest changeThis 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, 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.
Selling, general and administrative expenses increased 7 percent in 2022 compared to 2021, primarily driven by increased investment in sales resources, higher infrastructure-related, travel and marketing-related costs, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
Selling, general and administrative expenses increased 7 percent in 2022 compared to 2021, primarily driven by increased investment in sales resources, higher infrastructure-related, travel-related, and marketing costs, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
In 2022, we used $861 million for financing activities, including $849 million of treasury stock repurchases and $74 million of tax payments related to net share settlement of equity awards, partially offset by $63 million of proceeds from issuance of common stock under employee stock plans.
In 2022, we used $861 million for financing activities, including $849 million for treasury stock repurchases and $74 million for tax payments related to net share settlement of equity awards, partially offset by $63 million of proceeds from issuance of common stock under employee stock plans.
In 2021, we used $671 million for financing activities, including $673 million of treasury stock repurchases and $53 million of tax payments related to net share settlement of equity awards, partially offset by $59 million of proceeds from issuance of common stock under employee stock plans.
In 2021, we used $671 million for financing activities, including $673 million for treasury stock repurchases and $53 million for tax payments related to net share settlement of equity awards, partially offset by $59 million of proceeds from issuance of common stock under employee stock plans.
In accordance with the guidance on the accounting for uncertainty in income taxes, for all U.S. and other tax jurisdictions, we recognize potential liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes and interest will be due.
In accordance with the guidance on the accounting for uncertainty in income taxes, for all U.S. and other tax jurisdictions, we recognize potential liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes and interest will be due.
The qualitative factors assist in determining whether it is more-likely-than-not that the indefinite-lived intangible asset is impaired. An organization may choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to calculating its fair value. Our indefinite-lived intangible assets are in-process research and development ("IPR&D") intangible assets.
The qualitative factors assist in determining whether it is more likely than not that the indefinite-lived intangible asset is impaired. An organization may choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to calculating its fair value. Our indefinite-lived intangible assets are generally in-process research and development ("IPR&D") intangible assets.
Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, share-based compensation, retirement and post-retirement plan assumptions, valuation of goodwill and other intangible assets, warranty, loss contingencies, restructuring and accounting for income taxes. Revenue recognition.
Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective, or complex judgments by management. Those policies are revenue recognition, inventory valuation, share-based compensation, retirement and post-retirement plan assumptions, valuations of goodwill and other intangible assets, warranty, loss contingencies, restructuring, and accounting for income taxes. Revenue recognition.
Research and development expense in 2022 increased 3 percent when compared to 2021, primarily driven by investments in key growth opportunities in our end markets and leading-edge technologies, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
Research and development expense in 2022 increased 3 percent compared to 2021, primarily driven by investments in key growth opportunities in our end markets and leading-edge technologies, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
The increase in net income for 2022 when compared to 2021 was primarily driven by higher revenue volume, lower amortization of acquisition-related balances and lower variable people-related costs, partially offset by higher material costs and higher selling, general and administrative, R&D and income tax expenses.
The increase in net income for 2022 compared to 2021 was primarily driven by higher revenue volume, lower amortization of acquisition-related balances, and lower variable people-related costs, partially offset by higher material costs and higher selling, general and administrative, R&D, and income tax expenses.
Selling, general and administrative expense in 2022 increased 7 percent when compared to 2021, primarily driven by increased investment in sales resources, higher infrastructure-related, marketing and travel-related costs, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
Selling, general and administrative expense in 2022 increased 7 percent compared to 2021, primarily driven by increased investment in sales resources, higher infrastructure-related, marketing, and travel-related costs, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
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 Annual Report on Form 10-K. Overview and Executive Summary Keysight Technologies, Inc.
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 I Item 1A and elsewhere in this Annual Report on Form 10-K. Overview and Executive Summary Keysight Technologies, Inc.
With regard to the $136 million of long-term liabilities for uncertain tax positions, we are unable to accurately predict when these amounts will be realized or released. 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.
With regard to the $169 million of long-term liabilities for uncertain tax positions, we are unable to accurately predict when these amounts will be realized or released. 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.
During the fourth quarter of 2022, we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach. Based on the results of our qualitative testing, we believe that it is more-likely-than-not that the fair value of each reporting unit is greater than its respective carrying value.
During the fourth quarter of 2023, we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach. Based on the results of our qualitative testing, we believe that it is more likely than not that the fair value of each reporting unit is greater than its respective carrying value.
The U.S. discount rates as of October 31, 2022 and 2021 were determined based on the results of matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio. The non-U.S. discount rates as of October 31, 2022 and 2021 were determined using spot rates along the yield curve to calculate disaggregated discount rates.
The U.S. discount rates as of October 31, 2023 and 2022 were determined based on the results of matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio. The non-U.S. discount rates as of October 31, 2023 and 2022 were determined using spot rates along the yield curve to calculate disaggregated discount rates.
The increase in net other income for 2022 when compared to 2021 was primarily driven by $38 million lower amortization of net actuarial losses and a 2021 loss on a partial settlement of a non-U.S. pension plan, partially offset by a $31 million loss on our equity investments.
The increase in net other income for 2022 compared to 2021 was primarily driven by $38 million lower amortization of net actuarial losses and a 2021 loss on a partial settlement of a non-U.S. pension plan, partially offset by a loss on our equity investments.
At October 31, 2022, the company maintains a valuation allowance mainly related to net operating losses in Luxembourg and the U.K., capital losses in the U.K., and California research credits. We intend to maintain a valuation allowance in these jurisdictions until sufficient positive evidence exists to support their reversal.
At October 31, 2023, the company maintains a valuation allowance mainly related to net operating losses in Luxembourg and the U.K., capital losses and net operating losses in the U.K., and California research credits. We intend to maintain a valuation allowance in these jurisdictions until sufficient positive evidence exists to support their reversal.
The remaining U.S. transition tax liability, which Keysight originally elected to pay over 8 years, is payable over the next 4 years and relates to a one-time U.S. tax on those earnings that had not been previously repatriated to the U.S.
The remaining U.S. transition tax liability, which Keysight originally elected to pay over 8 years, is payable over the next 3 years and relates to a one-time U.S. tax on those earnings that had not been previously repatriated to the U.S.
The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory and accounts payable depends on 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. • Net cash used for retirement and post-retirement benefits was $19 million in 2022, compared to net cash provided of $7 million in 2021 and net cash used of $108 million in 2020.
The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory, and accounts payable depends on 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. • Net cash used for retirement and post-retirement benefits was $8 million in 2023 compared to net cash used of $19 million in 2022 and net cash provided of $7 million in 2021.
As of October 31, 2022 and October 31, 2021, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the year ended October 31, 2022. See note 11, "Debt" for additional information.
As of October 31, 2023 and 2022, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the year ended October 31, 2023. See Note 11, "Debt" for additional information.
As of October 31, 2022, we believe our cash and cash equivalents, cash generated from operations, and our ability to access capital markets and credit lines will satisfy our cash needs for the foreseeable future both globally and domestically.
As of October 31, 2023, we believe our cash and cash equivalents, cash generated from operations, and our ability to access capital markets and credit lines will satisfy our cash needs for the foreseeable future both globally and domestically.
We consider all available positive and negative evidence on a jurisdiction-by-jurisdiction 51 Table of Contents basis when assessing whether it is more likely than not that deferred tax assets are recoverable. We consider evidence such as our past operating results, the existence of losses in recent years and our forecast of future taxable income.
We consider all available positive and negative evidence on a jurisdiction-by-jurisdiction basis when assessing whether it is more likely than not that deferred tax assets are recoverable. We consider evidence such as our past operating results, the existence of losses in recent years and our forecast of future taxable income.
We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of October 31, 2022.
We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of October 31, 2023.
Research and development expense increased 4 percent in 2022 compared to 2021, primarily driven by investments in key growth opportunities in our end markets and leading-edge technologies, as well as incremental costs of acquired businesses, 39 Table of Contents partially offset by lower variable people-related costs.
Research and development expense increased 4 percent in 2022 compared to 2021, primarily driven by investments in key growth opportunities in our end markets and leading-edge technologies, as well as incremental costs of acquired businesses, partially offset by lower variable people-related costs.
Returns are recorded in the period received from the customer and historically have not been material. The following table provides the percent change in revenue for 2022 and 2021 by geographic region and the impact of foreign currency movements as compared to the respective prior year.
Returns are recorded in the period received from the customer and historically have not been material. The following table provides the percent change in revenue for 2023 and 2022 by geographic region and the impact of foreign currency movements compared to the respective prior year.
In addition, the new credit agreement permits the company, subject to certain customary conditions, on one or more occasions to request to increase the total commitments under the Revolving Credit Facility by up to $250 million in the aggregate. We may use amounts borrowed under the facility for general corporate purposes.
The Revolving Credit Facility permits the company, subject to certain customary conditions, on one or more occasions to request to increase the total commitments under the Revolving Credit Facility by up to $250 million in the aggregate. We may use amounts borrowed under the Revolving Credit Facility for general corporate purposes.
For the next twelve months, we do not expect to contribute to our U.S. defined benefit plan and U.S. post-retirement benefit plan, and we expect to contribute $11 million to our non-U.S. defined benefit plans.
For the next twelve months, we do not expect to contribute to our U.S. defined benefit plan and U.S. post-retirement benefit plan, and we expect to contribute $12 million to our non-U.S. defined benefit plans.
New Accounting Standards See Note 1, "Overview and summary of significant accounting policies," to the consolidated financial statements for a description of new accounting pronouncements.
New Accounting Standards See Note 1, "Overview, Basis of Presentation and Summary of Significant Accounting Policies," to the consolidated financial statements for a description of new accounting pronouncements.
If the carrying amount of a reporting unit exceeds its estimated fair value, then an impairment charge is 50 Table of Contents recorded for the amount by which the carrying amount exceeds the reporting unit's fair value up to a maximum amount of the goodwill balance for the reporting unit.
If the carrying amount of a reporting unit exceeds its estimated fair value, then an impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit's fair value up to a maximum amount of the goodwill balance for the reporting unit.
Selling, general and administrative expense in 2022 increased 6 percent when compared to 2021, primarily driven by higher infrastructure-related, marketing and travel-related costs, partially offset by lower variable people-related costs.
Selling, general and administrative expense in 2023 increased 4 percent compared to 2022, primarily driven by higher selling and travel-related costs, partially offset by variable people-related costs. Selling, general and administrative expense in 2022 increased 6 percent compared to 2021, primarily driven by higher infrastructure-related, marketing, and travel-related costs, partially offset by lower variable people-related costs.
In addition, we used this method to calculate two components of the periodic benefit cost: service cost and interest cost. If we changed our discount rate by 1 percent, the impact would be $7 million on U.S. net periodic benefit cost and $8 million on non-U.S. net periodic benefit cost.
In addition, we used this method to calculate two components of the periodic benefit cost: service cost and interest cost. If we changed our discount rate by 1 percent, the impact would be $6 million on U.S. net periodic benefit cost and $5 million on non-U.S. net periodic benefit cost.
The open tax years for the U.S. federal income tax return and most state income tax returns are from November 1, 2017 through the current tax year. For the majority of our foreign entities, the open tax years are from November 1, 2017 through the current tax year.
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, 2017 through the current tax year.
We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. See note 14, "Commitments and contingencies." As of October 31, 2022, we had non-cancellable purchase commitments that aggregated to approximately $553 million, of which the majority is for less than one year. Other purchase commitments.
We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. See Note 14, "Commitments and Contingencies." As of October 31, 2023, we had non-cancellable purchase commitments that aggregated $467 million, of which the majority is for less than one year. Other purchase commitments.
We experience some fluctuations within individual lines of the consolidated balance sheet and 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.
The result of hedging has been included in our consolidated statement of operations. We experience some fluctuations within individual lines of the consolidated balance sheet and consolidated statement of operations because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, and monetary assets and liabilities.
The 2021 significant nonrecurring tax benefits include the release of valuation allowance on Netherlands net operating losses in 2021 and a decrease 40 Table of Contents due to the 2021 actual tax impact of acquired entity integration as compared to the estimate at acquisition based on the finalization of the integration plan.
The 2021 significant nonrecurring tax benefits include the release of valuation allowance on Netherlands net operating losses in 2021 and a decrease due to the 2021 actual tax impact of acquired entity integration compared to the estimate at acquisition based on the finalization of the integration plan.
We have contractual obligations for principal and interest payments on our senior notes. See note 11, "Debt" for additional information. 47 Table of Contents Operating lease commitments. Commitments under operating leases primarily relates to leasehold properties. See Note 10, "Leases" for additional information. Commitments to contract manufacturers and suppliers.
We have contractual obligations for principal and interest payments on our senior notes. See Note 11, "Debt" for additional information. Operating lease commitments. Commitments under operating leases primarily relates to leasehold properties. See Note 10, "Leases," for additional information. Commitments to contract manufacturers and suppliers.
We enter into contracts that 48 Table of Contents may involve multiple performance obligations, and we allocate the transaction price between each performance obligation on the basis of relative standalone selling price (“SSP”). We recognize revenue following the five-step model. 1.
We enter into contracts that may involve multiple performance obligations, and we allocate the transaction price between each performance obligation on the basis of relative standalone selling price (“SSP”). We recognize revenue following a five-step model. 1.
The ultimate amounts we will contribute depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates and other factors.
The ultimate amounts we may contribute depend on, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates, and other factors.
In 2022, 2021 and 2020, we generated operating cash flows of $1,144 million, $1,322 million and $1,016 million, respectively. Outlook Our first-to-market solutions strategy enables customers to develop new technologies and accelerate innovation and provides a platform for long-term growth.
In 2023, 2022 and 2021, we generated operating cash flows of $1,408 million, $1,144 million and $1,322 million, respectively. Outlook 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.
Overview of Cash Flows Our key cash flow activities were as follows: Year Ended October 31, 2022 2021 2020 (in millions) Net cash provided by operating activities $ 1,144 $ 1,322 $ 1,016 Net cash used in investing activities $ (251) $ (353) $ (442) Net cash used in financing activities $ (861) $ (671) $ (413) Operating Activities Cash flows from operating activities can fluctuate significantly from period to period as working capital needs, the timing of payments for income taxes, variable pay, pension funding, and other items impact reported cash flows.
Overview of Cash Flows Our key cash flow activities were as follows: Year Ended October 31, 2023 2022 2021 in millions Net cash provided by operating activities $ 1,408 $ 1,144 $ 1,322 Net cash used in investing activities $ (288) $ (251) $ (353) Net cash used in financing activities $ (687) $ (861) $ (671) Operating Activities Cash flows from operating activities can fluctuate significantly from period to period as working capital needs, the timing of payments for income taxes, variable pay, pension funding, and other items impact reported cash flows.
Other income (expense), net Other income (expense), net for 2022, 2021 and 2020 was income of $14 million, $6 million and $63 million, respectively, and primarily includes net income related to our defined benefit and post-retirement benefit plans (interest cost, expected return on assets, amortization of net actuarial loss and prior service credits, and gains (losses) on settlements and curtailments) and the change in fair value of our equity investments.
Other income (expense) for 2023, 2022, and 2021 was expense of $25 million, income of $14 million, and income of $6 million, respectively, and primarily includes net income related to our defined benefit and post-retirement benefit plans (interest cost, expected return on assets, amortization of net actuarial loss and prior service credits, and gains (losses) on settlements and curtailments), currency gains (losses), gains (losses) on derivative instruments, and the change in fair value of our equity investments.
Investments in property, plant and equipment increased $11 million as compared to 2021 and increased $57 million in 2021 as compared to 2020. The increase in capital spending in 2022 was driven by capital investments to increase the resiliency of our supply chains.
Investments in property, plant and equipment increased $11 million compared to 2022 and increased $11 million in 2022 compared to 2021. The increase in capital spending in 2023 was driven by capital investments to increase the resiliency of our supply chains.
The impact of the tax incentives decreased income taxes by $81 million, $70 million and $53 million in 2022, 2021 and 2020, respectively. The increase in tax benefit from 2021 to 2022 is primarily due to a change in the jurisdictional mix of non-U.S. earnings, which increased the earnings taxed at incentive tax rates in 2022.
The impact of the tax incentives decreased income taxes by $95 million, $81 million, and $70 million in 2023, 2022, and 2021, respectively. The increase in tax benefit from 2022 to 2023 was primarily due to a change in the jurisdictional mix of non-U.S. earnings, which increased the earnings taxed at incentive tax rates in 2023.
Foreign currency movements had an unfavorable impact of 2 percentage points on year-over-year revenue growth for 2022 as compared to 2021. Revenue grew across all regions and in both the commercial communications and the aerospace, defense and government markets.
Communications Solutions Group revenue for 2022 increased 8 percent compared to 2021. Foreign currency movements had an unfavorable impact of 2 percentage points on year-over-year revenue growth for 2022 compared to 2021. Revenue grew across all regions and in both the commercial communications and the aerospace, defense and government markets.
Cash and cash requirements Cash October 31, 2022 2021 (in millions) Cash, cash equivalents and restricted cash $ 2,057 $ 2,068 U.S. $ 371 $ 427 Non-U.S. $ 1,686 $ 1,641 Our cash and cash equivalents mainly consist of investments in institutional money market funds, short-term deposits held at major global financial institutions and similar short duration instruments with original maturities of three months or less.
Cash and cash requirements Cash October 31, 2023 2022 in millions Cash, cash equivalents and restricted cash $ 2,488 $ 2,057 U.S. $ 362 $ 371 Non-U.S. $ 2,126 $ 1,686 Our cash and cash equivalents mainly consist of investments in institutional money market funds, short-term deposits held at major global financial institutions, and similar short duration instruments with original maturities of three months or less.
The company believes there are numerous 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 avenues to resolve this issue favorably for the company.
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.
Investing Activities Net cash changes in investing activities primarily relates to investments in property, plant and equipment and acquisitions of businesses to support our growth. Net cash used in investing activities decreased by $102 million in 2022 as compared to 2021 and decreased by $89 million in 2021 as compared to 2020.
Investing Activities Net cash changes in investing activities primarily relates to investments in property, plant and equipment and acquisitions of businesses to support our growth. Net cash used in investing activities increased by $37 million in 2023 compared to 2022 and decreased by $102 million in 2022 compared to 2021.
In addition to the obligations noted above, as of October 31, 2022 we had $38 million of outstanding letters of credit and surety bonds unrelated to the credit facility that were issued by various lenders.
In addition to the obligations noted above, as of October 31, 2023, we had $41 million of outstanding letters of credit and surety bonds that were issued by various lenders.
Income Taxes Year Ended October 31, 2022 2021 2020 (in millions) Provision for income taxes $ 161 $ 116 $ 134 Effective tax rate 13 % 11 % 18 % The effective tax rate was 13 percent, 11 percent, and 18 percent for 2022, 2021 and 2020, respectively.
Income Taxes Year Ended October 31, 2023 2022 2021 (in millions) Provision for income taxes $ 300 $ 161 $ 116 Effective tax rate 22 % 13 % 11 % The effective tax rate was 22 percent, 13 percent, and 11 percent for 2023, 2022, and 2021, respectively.
Foreign currency movements had an unfavorable impact of 3 percentage points on year-over-year revenue growth for 2022 as compared to 2021. The revenue increase was driven by continued investments in next-generation automotive and energy technologies, semiconductor measurement solutions, and industrial IoT. Revenue grew across all regions for 2022 as compared to 2021.
Revenue for the Electronic Industrial Solutions Group in 2022 increased 14 percent compared to 2021. Foreign currency movements had an unfavorable impact of 3 percentage points on year-over-year revenue growth for 2022 compared to 2021. The revenue increase was driven by continued investments in next-generation automotive and energy technologies, semiconductor measurement solutions, and industrial IoT.
Gross margin increased 2 percentage points in 2021 compared to 2020, primarily driven by lower amortization of acquisition-related balances and higher revenue volume, partially offset by higher variable people-related costs. Excess and obsolete inventory charges were $27 million in 2022, $27 million in 2021 and $29 million in 2020.
Gross margin increas ed 2 percentage points in 2022 compared to 2021, primarily driven by lower amortization of acquisition-related balances, price increases, higher revenue volume, and lower variable people-related costs, partially offset by higher material costs. Excess and obsolete inventory charges were $27 million in 2023, 2022, and 2021.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 that includes changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for Keysight beginning November 1, 2023 and a one percent excise tax on repurchases of stock after December 31, 2022.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which included changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for Keysight beginning November 1, 2023.
See "Issuer Purchases of Equity Securities" under Part II Item 2 for additional information. 46 Table of Contents Debt October 31, 2022 2021 (in millions) Total debt (par value) $ 1,800 $ 1,800 Revolving credit facility $ 750 $ 750 On July 30, 2021, we entered into a new credit agreement that amended and restated our existing credit agreement dated February 15, 2017 in its entirety, and provides for a $750 million five-year unsecured revolving credit facility (the “Revolving Credit Facility”) that will expire on July 30, 2026 and bears interest at an annual rate of LIBOR + 1 percent along with a facility fee of 0.125 percent per annum.
See "Issuer Purchases of Equity Securities" under Part II Item 2 for additional information. 45 Table of Contents Debt October 31, 2023 2022 in millions Total debt (par value) $ 1,800 $ 1,800 Revolving credit facility $ 750 $ 750 On July 30, 2021, we entered into an amended and restated credit agreement (the “Revolving Credit Facility”), which provided a $750 million five-year unsecured revolving credit facility that expires on July 30, 2026 with an annual interest rate of LIBOR + 1 percent along with a facility fee of 0.125 percent per annum.
To estimate the present value of these future payments, we are required to make assumptions using actuarial concepts within the framework of GAAP. The discount rate is a critical assumption.
To estimate the present value of these future payments, we are required to make assumptions using actuarial concepts within the framework of generally accepted accounting principles in the U.S. The discount rate is a critical assumption.
Revenue for both the Communications Solutions Group and the Electronic Industrial Solutions Group grew as compared to 2021, driven by growth across all regions and markets. Revenue from the Communications Solutions Group and the Electronic Industrial Solutions Group represented approximately 70 percent and 30 percent, respectively, of total revenue for 2022.
Revenue for both the Communications Solutions Group and the Electronic Industrial Solutions Group grew compared to 2021. Revenue from the Communications Solutions Group and the Electronic Industrial Solutions Group represented approximately 70 percent and 30 percent, respectively, of total revenue for 2022.
Plan assets are valued at fair value. If we changed our estimated return on assets by 1 percent, the impact would be $10 million on U.S. net periodic benefit cost and $11 million on non-U.S. net periodic benefit cost. Goodwill and other intangible assets.
If we changed our estimated return on assets by 1 percent, the impact would be $8 million on U.S. net periodic benefit cost and $8 million on non-U.S. net periodic benefit cost. Goodwill and other intangible assets.
Treasury stock repurchases On November 18, 2021, our board of directors approved a stock repurchase program authorizing the purchase of up to $1,200 million of the company’s common stock, replacing the previously approved November 2020 program, under which $77 million remained.
Treasury stock repurchases On March 6, 2023, our board of directors approved a new stock repurchase program authorizing the purchase of up to $1,500 million of the company’s common stock, replacing the previously approved November 2021 program authorizing the purchase of up to $1,200 million of the company’s common stock, of which $225 million remained.
Non-cash adjustments to net income were higher by $32 million, primarily due to a $60 million decrease in deferred tax benefits, a $31 million unrealized loss on investment in equity securities, a $22 million increase in share-based compensation expense and a $7 million impairment of assets, partially offset by a $70 million decrease in amortization, a $16 million lower pension settlement loss and a $2 million decrease from other miscellaneous non-cash activities.
Non-cash adjustments to net income were higher by $32 million, primarily due to a $60 million decrease in deferred tax benefits, a $31 million unrealized loss on investment in equity securities, a $22 million increase in share-based compensation expense and a $7 million asset impairment charge, partially offset by a $70 million decrease in amortization, a $16 million lower pension settlement loss and a $2 million decrease from other miscellaneous non-cash activities. • The aggregate of accounts receivable, inventory, and accounts payable used net cash of $196 million during 2023, compared to net cash used of $273 million in 2022 and $112 million in 2021.
For software license sales transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer. For sales of implementation service and custom solutions or in instances where products are sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance.
For sales of implementation service and custom solutions or in instances where products are sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance.
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. 38 Table of Contents Results from Operations - Years ended October 31, 2022, 2021 and 2020 A summary of our results is as follows: Year Ended October 31, 2022 over 2021 % Change 2021 over 2020 % Change 2022 2021 2020 in millions, except margin data Revenue $ 5,420 $ 4,941 $ 4,221 10% 17% Products $ 4,474 $ 4,050 $ 3,432 10% 18% Percentage of revenue 83 % 82 % 81 % 1 ppt 1 ppt Services and other $ 946 $ 891 $ 789 6% 13% Percentage of revenue 17 % 18 % 19 % (1) ppt (1) ppt Gross margin 63.7 % 62.1 % 60.0 % 2 ppts 2 ppts Products 63.9 % 62.4 % 60.0 % 2 ppts 2 ppts Services and other 62.7 % 60.7 % 60.0 % 2 ppts 1 ppt Research and development $ 841 $ 811 $ 715 4% 13% Percentage of revenue 16 % 16 % 17 % (1) ppt (1) ppt Selling, general and administrative $ 1,283 $ 1,195 $ 1,097 7% 9% Percentage of revenue 24 % 24 % 26 % — (2) ppts Other operating expense (income), net $ (8) $ (17) $ (44) (53)% (61)% Income from operations $ 1,334 $ 1,080 $ 765 24% 41% Operating margin 24.6 % 21.9 % 18.1 % 3 ppts 4 ppts Interest income $ 16 $ 3 $ 11 676% (81)% Interest expense $ (79) $ (79) $ (78) —% 1% Other income (expense), net $ 14 $ 6 $ 63 105% (90)% Income before taxes $ 1,285 $ 1,010 $ 761 27% 33% Provision for income taxes $ 161 $ 116 $ 134 39% (14)% Net income $ 1,124 $ 894 $ 627 26% 43% Revenue Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
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. 37 Table of Contents Results from Operations - Years ended October 31, 2023, 2022 and 2021 A summary of our results is as follows: Year Ended October 31, 2023 over 2022 % Change 2022 over 2021 % Change 2023 2022 2021 in millions, except margin data Revenue $ 5,464 $ 5,420 $ 4,941 1% 10% Products $ 4,336 $ 4,386 $ 3,993 (1)% 10% Percentage of revenue 79 % 81 % 81 % (2) ppts — Services and other $ 1,128 $ 1,034 $ 948 9% 9% Percentage of revenue 21 % 19 % 19 % 2 ppts — Gross margin 64.6 % 63.7 % 62.1 % 1 ppt 2 ppts Products 64.2 % 63.3 % 62.2 % 1 ppt 1 ppt Services and other 66.3 % 64.9 % 61.9 % 1 ppt 3 ppts Research and development $ 882 $ 841 $ 811 5% 4% Percentage of revenue 16 % 16 % 16 % 1 ppt (1) ppt Selling, general and administrative $ 1,307 $ 1,283 $ 1,195 2% 7% Percentage of revenue 24 % 24 % 24 % — — Other operating expense (income), net $ (15) $ (8) $ (17) 80% (53)% Income from operations $ 1,358 $ 1,334 $ 1,080 2% 24% Operating margin 24.8 % 24.6 % 21.9 % — 3 ppts Interest income $ 102 $ 16 $ 3 518% 676% Interest expense $ (78) $ (79) $ (79) (1)% — Other income (expense), net $ (25) $ 14 $ 6 — 105% Income before taxes $ 1,357 $ 1,285 $ 1,010 6% 27% Provision for income taxes $ 300 $ 161 $ 116 87% 39% Net income $ 1,057 $ 1,124 $ 894 (6)% 26% Revenue Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
We did not grant any option awards in 2022, 2021 and 2020. Retirement and post-retirement benefit plan assumptions. Retirement and post-retirement benefit plan costs are a significant cost of doing business. They represent obligations that will ultimately be settled sometime in the future and therefore are subject to estimation.
Retirement and post-retirement benefit plan costs are a significant cost of doing business. They represent obligations that will ultimately be settled sometime in the future and therefore are subject to estimation.
Financing Activities Net cash changes in financing activities primarily relate to proceeds from issuance of common stock under employee stock plans, tax payments related to net share settlement of equity awards and treasury stock repurchases.
Financing Activities Net cash changes in financing activities primarily relate to proceeds from issuance of common stock under employee stock plans, tax payments related to net share settlement of equity awards, and treasury stock repurchases. Net cash used in financing activities decreased by $174 million in 2023 compared to 2022 and increased by $190 million in 2022 compared to 2021.
Foreign currency movements had an unfavorable impact of 3 percentage points on order growth for 2022 as compared to 2021. Orders grew across all regions, including double-digit growth in Asia Pacific. Total orders for 2021 were $5,356 million, an increase of 18 percent when compared to 2020.
Foreign currency movements had an unfavorable impact of 3 percentage points on order growth for 2022 compared to 2021. Orders grew across all regions, including double-digit growth in Asia Pacific. Revenue of $5,464 million for 2023 increased 1 percent compared to 2022.
Gross margin in 2021 increased 2 percentage points as compared to 2020, primarily driven by higher revenue volume and favorable mix. Research and development expense in 2022 increased 4 percent when compared to 2021, primarily driven by greater investments in key growth opportunities in our end markets and leading-edge technologies, partially offset by lower variable people-related costs.
Research and development expense in 2022 increased 4 percent compared to 2021, primarily driven by greater investments in key growth opportunities in our end markets and leading-edge technologies, partially offset by lower variable people-related costs.
We review other intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate.
We review other intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. No impairments of purchased intangible assets were recorded during the years ended October 31, 2023, 2022, and 2021.
Net cash provided by operating activities decreased by $178 million in 2022 as compared to 2021 and increased $306 million in 2021 as compared to 2020. • Net income in 2022 increased $230 million as compared to 2021.
Net cash provided by operating activities increased $264 million in 2023 compared to 2022 and decreased $178 million in 2022 compared to 2021. • Net income in 2023 decreased $67 million compared to 2022.
A provision enacted in the TCJA requiring U.S. tax research and experimental expenditures to be capitalized and amortized over five years for research activities conducted in the U.S. and fifteen years for research activities conducted outside of the U.S. will be effective for Keysight beginning November 1, 2022.
A provision enacted in the Tax Cuts and Jobs Act of 2017 (the "TCJA") became effective for Keysight on November 1, 2022, requiring that research and experimental expenditures be capitalized for U.S. tax purposes. The capitalized expenses are amortized over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside the U.S.
Revenue from the commercial communications market represented approximately 69 percent of total Communications Solutions Group revenue in 2022 and increased 11 percent as compared to 2021. Revenue grew across all regions, driven by strong market demand across the communications ecosystem.
Revenue from the commercial communications market represented approximately 69 percent of total Communications Solutions Group revenue in 2022 and increased 11 percent compared to 2021.
In 2022, 2021 and 2020, we assessed impairment by performing a qualitative test. No material impairments of indefinite-lived intangible assets were recorded in 2022, 2021 and 2020. Warranty. Keysight warranties on products sold through direct sales channels are primarily for one year. Warranties for products sold through distribution channels are primarily for three years.
No material impairments of indefinite-lived intangible assets were recorded in 2021. We had no IPR&D intangible assets as of October 31, 2023 and 2022. Warranty. Keysight warranties on products sold through direct sales channels are primarily for one year. Warranties for products sold through distribution channels are primarily for three years.
Revenue associated with extended warranties is deferred and recognized over the extended coverage period. Loss Contingencies. As discussed in Note 13 and 14 to the consolidated financial statements, we are, from time to time, subject to a variety of litigation and similar contingent liabilities incidental to our business (or the business operations of previously owned entities).
As discussed in Note 13, "Supplemental Financial Information" and Note 14, "Commitments and Contingencies" to the consolidated financial statements, we are, from time to time, subject to a variety of litigation and similar contingent liabilities incidental to our business (or the business operations of previously owned entities).
Year Ended October 31, 2022 over 2021 % Change 2021 over 2020 % Change 2022 2021 2020 Total gross margin 66.5 % 65.3 % 65.2 % 1 ppt — Operating margin 28.5 % 26.5 % 24.7 % 2 ppts 2 ppts (in millions) Research and development $ 606 $ 589 $ 530 3% 11% Selling, general and administrative $ 848 $ 791 $ 749 7% 6% Other operating expense (income), net $ (11) $ (12) $ (9) (15)% 34% Income from operations $ 1,085 $ 932 $ 773 16% 20% Gross margin for the Communications Solutions Group in 2022 increased 1 percentage point as compared to 2021, primarily driven by price increases, higher revenue volume and lower variable people-related costs, partially offset by higher material costs.
Gross Margin and Operating Margin Year Ended October 31, 2023 over 2022 % Change 2022 over 2021 % Change 2023 2022 2021 in millions, except margin data Gross margin 67.7 % 66.5 % 65.3 % 1 ppt 1 ppt Research and development $ 618 $ 606 $ 589 2% 3% Selling, general and administrative $ 821 $ 848 $ 791 (3)% 7% Other operating expense (income), net $ (11) $ (11) $ (12) 1% (15)% Income from operations $ 1,068 $ 1,085 $ 932 (2)% 16% Operating margin 29.0 % 28.5 % 26.5 % 1 ppt 2 ppts Gross margin for the Communications Solutions Group in 2023 increased 1 percentage point compared to 2022, primarily driven by price increases and favorable mix, partially offset by higher warranty costs.
In 2020, we used $413 million for financing activities, including $411 million of treasury stock repurchases and $53 million of tax payments related to net share settlement of equity awards and $7 million of payments on short-term debt, partially offset by $58 million of proceeds from issuance of common stock under employee stock plans.
In 2023, we used $687 million for financing activities, including $702 million for treasury stock repurchases and $49 million for tax payments related to net share settlement of equity awards, partially offset by $67 million of proceeds from issuance of common stock under employee stock plans.
Net income was $1,124 million in 2022 compared to net income of $894 million and $627 million in 2021 and 2020, respectively.
Net income was $1,057 million in 2023 compared to net income of $1,124 million and $894 million in 2022 and 2021, respective ly.
Interest Income and Expense Interest income for 2022, 2021 and 2020 was $16 million, $3 million and $11 million, respectively, and primarily relates to interest earned on our cash balances. Interest expense for 2022, 2021 and 2020 was $79 million, $79 million and $78 million, respectively, and primarily relates to interest on our senior notes.
Interest expense for 2023, 2022, and 2021 was $78 million, $79 million, and $79 million, respectively, and primarily relates to interest on our senior notes.
Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management.
The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds requires significant judgment by management.
Year over Year % Change 2022 over 2021 2021 over 2020 Geographic Region actual Currency Impact Favorable (Unfavorable) actual Currency Impact Favorable (Unfavorable) Americas 10% — 22% — Europe 11% (5) ppts 18% 4 ppts Asia Pacific 9% (4) ppts 13% 1 ppt Total revenue 10% (2) ppts 17% 1 ppt Gross Margin, Operating Margin and Income Before Taxes Gross margin increased 2 percentage points in 2022 compared to 2021, primarily driven by lower amortization of acquisition-related balances, price increases, higher revenue volume and lower variable people-related costs, partially offset by higher material costs.
Year-over-Year Revenue Change 2023 over 2022 2022 over 2021 Geographic Region Actual Currency Impact Favorable (Unfavorable) Actual Currency Impact Favorable (Unfavorable) Americas — — 10% — Europe 8% (2) ppts 11% (5) ppts Asia Pacific (1)% (3) ppts 9% (4) ppts Total revenue 1% (2) ppts 10% (2) ppts 38 Table of Contents Gross Margin, Operating Margin and Income Before Taxes Gross margin increased 1 percentage point in 2023 compared to 2022, primarily driven by price increases and favorable mix, partially offset by higher warranty costs.
Communications Solutions Group The Communications Solutions Group serves customers spanning the worldwide commercial communications and aerospace, defense, and government end markets. The group’s solutions consist of electronic design and test software, electronic measurement instruments, systems and related services. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of electronic equipment and networks.
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.
For U.S. plans, gains and losses are amortized over the average future working lifetime. For most non-U.S. plans and U.S. post-retirement benefit plans, gains and losses are amortized using a separate layer for each year's gains and losses. The expected long-term return on plan assets is estimated using current and expected asset allocations as well as historical and expected returns.
For U.S. plans, gains and losses are amortized over the average future working lifetime. For most non-U.S. plans and U.S. post-retirement benefit plans, gains and losses are amortized using a separate layer for each year's gains and losses.
Other operating expense (income), net was income of $8 million, $17 million and $44 million for 2022, 2021 and 2020, respectively. The decrease in net other operating income in 2022 was primarily driven by asset impairment charges related to the discontinuance of our Russia operations.
Other operating expense (income) was income of $15 million, $8 million, and $17 million for 2023, 2022, and 2021, respectively. During fiscal year 2022, other operating expense (income) includes asset impairment charges of $7 million related to the discontinuance of our Russia operations.
Net income in 2021 increased $267 million as compared to 2020.
Net income in 2022 increased $230 million compared to 2021.
Year Ended October 31, 2022 over 2021 % Change 2021 over 2020 % Change 2022 2021 2020 Total gross margin 61.5 % 64.2 % 62.7 % (3) ppts 2 ppts Operating margin 31.0 % 31.3 % 27.1 % — 4 ppts (in millions) Research and development $ 207 $ 199 $ 167 4% 20% Selling, general and administrative $ 290 $ 272 $ 224 6% 21% Other operating expense (income), net $ (4) $ (5) $ (4) (17)% 20% Income from operations $ 501 $ 444 $ 296 13% 50% Gross margin in 2022 decreased 3 percentage points as compared to 2021, primarily driven by higher material costs, partially offset by higher revenue volume and price increases.
Gross Margin and Operating Margin Year Ended October 31, 2023 over 2022 % Change 2022 over 2021 % Change 2023 2022 2021 in millions, except margin data Gross margin 61.9 % 61.5 % 64.2 % — (3) ppts Research and development $ 224 $ 207 $ 199 8% 4% Selling, general and administrative $ 300 $ 290 $ 272 4% 6% Other operating expense (income), net $ (4) $ (4) $ (5) (4)% (17)% Income from operations $ 581 $ 501 $ 444 16% 13% Operating margin 32.7 % 31.0 % 31.3 % 2 ppts — Gross margin in 2023 was flat compared to 2022, primarily driven by higher revenue volum e and favorable mix, partially offset by higher warranty costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of October 31, 2022 and 2021, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows. 52 Table of Contents Interest rate risk A change in interest rates on long-term debt impacts the fair value of the company’s fixed-rate long-term debt but not the company’s earnings or cash flow because the interest on such debt is fixed.
Biggest changeInterest rate risk A change in interest rates on long-term debt impacts the fair value of the company’s fixed-rate long-term debt but not the company’s earnings or cash flow because the interest on such debt is fixed. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise.
We calculate the impact of foreign currency exchange rates movements by applying the actual foreign currency exchange rates in effect during the last month of each quarter to the current year to both the applicable current and prior year periods.
We calculate the impact of foreign currency exchange rates movements by applying the actual foreign currency exchange rates in effect during the last month of each fiscal quarter of the current fiscal year to both the applicable current and prior year periods.
However, since the company currently has no plans to repurchase its outstanding fixed-rate instruments before their maturity nor do the investors in our fixed-rate debt obligations have the right to demand we pay off these obligations prior to maturity, the impact of market interest rate fluctuations on the company’s fixed-rate long-term debt does not affect the company’s results of operations or stockholders’ equity. 53 Table of Contents
However, since the company currently has no plans to repurchase its outstanding fixed-rate instruments before their maturity, nor do the investors in our fixed-rate debt obligations have the right to demand we pay off these obligations prior to maturity, the impact of market interest rate fluctuations on the company’s fixed-rate long-term debt does not affect the company’s results of operations or stockholders’ equity. 52 Table of Contents
The unfavorable effects of changes in foreign currency exchange rates, principally as a result of the strength of the U.S. dollar, had an immaterial impact on our revenue in the year ended October 31, 2022.
The unfavorable effects of changes in foreign currency exchange rates, principally as a result of the strength of the U.S. dollar, had an immaterial impact on our revenue in the year ended October 31, 2023.
For further discussion of derivative financial instruments, see Note 9, "Derivatives." Currency exchange rate risk We are exposed to foreign currency exchange rate risks inherent in our sales commitments, anticipated sales, expenses and assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.
For further discussion of derivative financial instruments, see Note 9, "Derivatives." 51 Table of Contents Currency exchange rate risk We are exposed to foreign currency exchange rate risks inherent in our sales commitments, anticipated sales, expenses, assets and liabilities denominated in currencies other than the functional currency of our subsidiaries.
In anticipation of these foreign currency cash flows and in view of the volatility of the currency market, we enter into foreign exchange contracts as described above to substantially mitigate our currency risk. In 2022, 2021 and 2020, approximately 77 percent, 77 percent and 76 percent of our revenues were generated in U.S. dollars.
In anticipation of these foreign currency cash flows and in view of the volatility of the currency market, we enter into foreign exchange contracts as described above to substantially mitigate our currency risk. In 2023, 2022 and 2021, approximately 75 percent, 77 percent, and 77 percent, respectively, of our revenues were generated in U.S. dollars.
Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. As of October 31, 2022, a hypothetical 10 percent increase in interest rates would have decreased the fair value of the company’s fixed-rate long-term debt by approximately $36 million.
As of October 31, 2023, a hypothetical 10 percent increase in interest rates would have decreased the fair value of the company’s fixed-rate debt by approximately $30 million.
We also performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign exchange rates to the hedging contracts and the underlying exposures described above.
We also performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign exchange rates to the hedging contracts and the underlying exposures described above. As of October 31, 2023, and 2022, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations, or cash flows.

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