Item 1. Condensed Consolidated Financial Statements (Unaudited)

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Item 1. Condensed Consolidated Financial Statements (Unaudited)

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

(Unaudited)


	Three Months Ended
	January 31,
		2024		2023
Revenue:
Products		$	952	$	1,114
Services and other		307		267
Total revenue		1,259		1,381
Costs and expenses:
Cost of products		351		405
Cost of services and other		95		93
Total costs		446		498
Research and development		232		227
Selling, general and administrative		362		338
Other operating expense (income), net		(2)		(4)
Total costs and expenses		1,038		1,059
Income from operations		221		322
Interest income		23		19
Interest expense		(20)		(19)
Other income (expense), net		5		9
Income before taxes		229		331
Provision for income taxes		57		71
Net income		$	172	$	260

Net income per share:
Basic		$	0.98	$	1.46
Diluted		$	0.98	$	1.45

Weighted average shares used in computing net income per share:
Basic		175		178
Diluted		176		180

The accompanying notes are an integral part of these condensed consolidated financial statements.

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)


	Three Months Ended
	January 31,
		2024		2023
Net income		$	172	$	260
Other comprehensive income (loss):

Gain (loss) on derivative instruments, net of tax benefit (expense) of $1 and $6		(2)		(21)
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero		(2)		(2)
Foreign currency translation, net of tax benefit (expense) of zero		27		81
Net defined benefit pension cost and post-retirement plan costs:
Change in net actuarial loss, net of tax expense of $1 and $1		1		5

Other comprehensive income (loss)		24		63
Total comprehensive income		$	196	$	323

The accompanying notes are an integral part of these condensed consolidated financial statements.

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions, except par value and share data)

(Unaudited)


	January 31, 2024		October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,745	$	2,472

Accounts receivable, net	808		900
Inventory	1,024		985
Other current assets	499		452
Total current assets	4,076		4,809
Property, plant and equipment, net	771		761
Operating lease right-of-use assets	236		226
Goodwill	2,254		1,640
Other intangible assets, net	616		155
Long-term investments	90		81
Long-term deferred tax assets	662		671
Other assets	355		340
Total assets	$	9,060	$	8,683
LIABILITIES AND EQUITY
Current liabilities:

Current portion of long-term debt	$	609	$	599
Accounts payable	281		286
Employee compensation and benefits	261		304
Deferred revenue	592		541
Income and other taxes payable	146		90
Operating lease liabilities	43		40
Other accrued liabilities	184		189
Total current liabilities	2,116		2,049

Long-term debt	1,208		1,195
Retirement and post-retirement benefits	67		64
Long-term deferred revenue	213		216
Long-term operating lease liabilities	198		192
Other long-term liabilities	441		313
Total liabilities	4,243		4,029
Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding	—		—
Common stock; $0.01 par value; 1 billion shares authorized; issued and outstanding shares: 201 million and 200 million, respectively	2		2
Treasury stock, at cost; 26.1 million shares and 25.4 million shares, respectively	(3,073)		(2,980)
Additional paid-in-capital	2,547		2,487
Retained earnings	5,783		5,611
Accumulated other comprehensive loss	(442)		(466)
Total stockholders' equity	4,817		4,654


Total liabilities and equity	$	9,060	$	8,683

The accompanying notes are an integral part of these condensed consolidated financial statements.

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

(Unaudited)


	Three Months Ended
	January 31,
	2024		2023
Cash flows from operating activities:
Net income	$	172	$	260
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	30		29
Amortization	38		24
Share-based compensation	48		54
Deferred tax expense (benefit)	6		(1)
Excess and obsolete inventory-related charges	8		6
Unrealized loss (gain) on equity and other investments	(4)		(6)

Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable	124		6
Inventory	(42)		(44)
Accounts payable	1		(19)
Employee compensation and benefits	(74)		(84)
Deferred revenue	27		62
Income taxes payable	38		56
Retirement and post-retirement benefits	(2)		(3)
Prepaid assets	(9)		(10)
Other assets and liabilities	(33)		36
Net cash provided by operating activities	328		366
Cash flows from investing activities:
Investments in property, plant and equipment	(47)		(60)
Acquisition of businesses and intangible assets, net of cash acquired	(478)		—
Proceeds from sale and maturities of investments	11		—
Other investing activities	3		—
Net cash used in investing activities	(511)		(60)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans	32		33
Payment of taxes related to net share settlement of equity awards	(28)		(46)
Acquisition of non-controlling interests	(458)		—
Treasury stock repurchases	(93)		(125)
Other financing activities	(1)		(1)
Net cash used in financing activities	(548)		(139)
Effect of exchange rate movements	8		20
Net increase (decrease) in cash, cash equivalents, and restricted cash	(723)		187
Cash, cash equivalents, and restricted cash at beginning of period	2,488		2,057
Cash, cash equivalents, and restricted cash at end of period	$	1,765	$	2,244
Supplemental cash flow information:
Interest payments	$	—	$	—
Income tax paid, net	$	12	$	14
Investments in property, plant and equipment included in accounts payable	$	15	$	24

The accompanying notes are an integral part of these condensed consolidated financial statements.

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

(Unaudited)


	Common Stock					Treasury Stock
	Number of Shares	Par Value		Additional Paid-in Capital		Number of Shares	Treasury Stock at Cost		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total Stockholders' Equity
Balance as of October 31, 2023	199,771	$	2	$	2,487	(25,449)	$	(2,980)	$	5,611	$	(466)	$	—	$	4,654
Net income	—	—		—		—	—		172		—		4		176
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		24		—		24
ESI Group acquisition	—	—		—		—	—		—		—		458		458
Issuance of common stock	850	—		32		—	—		—		—		—		32
Taxes related to net share settlement of equity awards	—	—		(28)		—	—		—		—		—		(28)
Share-based compensation	—	—		52		—	—		—		—		—		52
Repurchase of common stock	—	—		—		(625)	(93)		—		—		—		(93)
Acquisition of non-controlling interests	—	—		4		—	—		—		—		(462)		(458)
Balance as of January 31, 2024	200,621	$	2	$	2,547	(26,074)	$	(3,073)	$	5,783	$	(442)	$	—	$	4,817

Balance as of October 31, 2022	198,569	$	2	$	2,333	(20,536)	$	(2,274)	$	4,554	$	(454)	$	—	$	4,161
Net income	—	—		—		—	—		260		—		—		260
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		63		—		63
Issuance of common stock	813	—		33		—	—		—		—		—		33
Taxes related to net share settlement of equity awards	—	—		(46)		—	—		—		—		—		(46)
Share-based compensation	—	—		58		—	—		—		—		—		58
Repurchase of common stock	—	—		—		(711)	(125)		—		—		—		(125)
Balance as of January 31, 2023	199,382	$	2	$	2,378	(21,247)	$	(2,399)	$	4,814	$	(391)	$	—	$	4,404

The accompanying notes are an integral part of these condensed consolidated financial statements.

KEYSIGHT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview. Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a global innovator in the computing, communications and electronics market, committed to advancing our customers’ business success by helping them solve critical challenges in the development and commercialization of their products and services. Our mission, "accelerating innovation to connect and secure the world," speaks to the value we provide our customers in a world of ever-increasing technological complexity. We deliver this value through a broad range of design and test solutions that address the critical challenges our customers face in bringing their innovations to market faster.

Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarters.

Basis of Presentation**.** We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The accompanying financial statements and information should be read in conjunction with our Annual Report on Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly our financial position as of January 31, 2024 and October 31, 2023, results of operations for the three months ended January 31, 2024 and 2023, and cash flows for the three months ended January 31, 2024 and 2023.

Principles of consolidation. The consolidated financial statements include the accounts of the company and our wholly- and majority-owned subsidiaries. All significant inter-company transactions have been eliminated. The consolidated financial statements also reflect the impact of non-controlling interests. Non-controlling interests do not have a significant impact on our consolidated results of operations; therefore, net income attributable to non-controlling interests of $4 million is not presented separately and is included in "other income (expense), net" in our condensed consolidated statements of operations.

Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

Acquisition of ESI Group SA. In the first quarter of fiscal 2024, we acquired all of the outstanding common stock of ESI Group SA ("ESI Group") for $935 million, net of cash acquired, using existing cash. See Note 2, Acquisitions, for further information of the acquisition of ESI Group.

Update to Significant Accounting Policies. There have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

New Accounting Pronouncements. Amendments to GAAP that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.

2. ACQUISITIONS

On November 3, 2023, we acquired 50.6% of the share capital of ESI Group SA ("ESI Group") for $512 million, using existing cash. During January 2024, we completed the acquisition of the remaining share capital of ESI Group for $458 million, using existing cash. The company entered into put/call agreements valued at $7 million for certain ESI Group equity awards, subject to a holding period that may extend beyond the explicit vesting period, for the right to receive a cash payment equal to the public tender offer consideration of 155 euros per share. On January 26, 2024, ESI Group was delisted from Euronext Paris. For the period from November 3, 2023 to January 31, 2024, ESI Group's net revenue and net income attributable to Keysight shareholders was $68 million and $2 million, respectively.

The ESI Group acquisition was accounted for in accordance with the authoritative accounting guidance. The acquired assets and assumed liabilities were recorded by Keysight at their estimated fair values. Keysight determined the estimated fair values with the assistance of valuations performed by third party specialists, discounted cash flow analysis, and estimates made by management. The acquisition of ESI Group expands our application layer portfolio with simulation capabilities that are

critical to accelerate innovation in multiple end markets. These factors, among others, contributed to a purchase price in excess of the estimated fair value of ESI Group's net identifiable assets acquired (see summary of net assets below), and, as a result, we have recorded goodwill in connection with this transaction.

Goodwill was assigned to the Communications Solutions Group ("CSG") and the Electronic Industrial Solutions Group ("EISG") reportable segments, based on the expected benefits and synergies that are likely to be realized from the ESI Group acquisition. We do not expect the goodwill recognized or any potential impairment charges in the future to be deductible for income tax purposes.

A portion of the overall purchase price was allocated to acquired intangible assets. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Therefore, a deferred tax liability of approximately $104 million was established primarily for the future amortization of these intangibles and is included in "other long-term liabilities" in the table below.

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of November 3, 2023 (in millions):


Cash and cash equivalents	$	35
Short-term investments	12
Accounts receivable	28
Other current assets	18
Property, plant and equipment	4
Operating lease right-of-use assets	8
Goodwill	603
Other intangible assets	494
Other assets	3
Total assets acquired	1,205
Accounts payable	(8)
Employee compensation and benefits	(23)
Deferred revenue	(14)
Income and other taxes payable	(8)
Operating lease liabilities	(3)
Other accrued liabilities	(18)
Debt	(24)
Retirement and post-retirement benefits	(7)
Long-term operating lease liabilities	(5)
Other long-term liabilities	(118)
Net assets acquired	$	977

The fair values of cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable, employee compensation and benefits, and deferred revenue were generally determined using historical carrying values given the short-term nature of these assets and liabilities. The fair value for intangible assets was determined with the input from third-party valuation specialists. The fair values of property, plant and equipment and certain other liabilities were determined internally using historical carrying values and estimates made by management. In connection with the acquisition and determination of the fair values of acquired assets and assumed liabilities, the company is in the process of obtaining additional information to refine its initial fair value estimates related to income taxes and intangible assets. We expect to finalize this allocation in the third quarter of fiscal year 2024. As additional information becomes available, we may revise the preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes may be material.

Valuation of Intangible Assets Acquired

The components of intangible assets acquired in connection with the ESI Group acquisition were as follows (in millions):


	Estimated Fair Value		Estimated useful life
Developed technology	$	270	6 years
Customer relationships	160		6 years
Backlog	15		3 years
Trademarks/Tradename	2		2 years
Total amortizable intangible assets	447
In-process research and development	47
Total intangible assets	$	494

As noted above, the intangible assets were valued with input from valuation specialists using the income approach, which includes the discounted cash flow, with and without, and relief from royalty methods. The in-process research and development was valued using the multi-period excess earnings method under the income approach by discounting forecasted cash flows directly related to the products expecting to result from the projects, net of returns on contributory assets. A discount rate of 12% was used to value the research and development projects, adjusted to reflect additional risks inherent in the acquired projects. The primary in-process projects acquired relate to next generation products which will be released in the near future. Total costs to complete for all ESI Group in-process research and development were estimated at approximately $7 million as of the close date.

Acquisition and integration costs directly related to the ESI Group acquisition are recorded in selling, general and administrative expenses and other income (expense), net, and were $14 million for the three months ended January 31, 2024. For the three months ended January 31, 2024, we incurred $5 million of acquisition-related compensation expense to redeem certain of ESI Group's outstanding unvested stock awards as of the date of the acquisition that were determined to relate to post-merger service periods.

The following represents pro forma operating results as if ESI Group had been included in the company's consolidated statements of operations as of the beginning of fiscal 2023 (in millions, except per share amounts):


	Three Months Ended
	January 31,
	2024		2023
Net revenue	$	1,259	$	1,423
Net income	$	186	$	250
Net income per share - Basic	$	1.07	$	1.40
Net income per share - Diluted	$	1.06	$	1.39

The unaudited pro forma financial information for the three months ended January 31, 2024 combines the historical results of Keysight and ESI Group for the three months ended January 31, 2024, assuming that the companies were combined as of November 1, 2022 and includes business combination accounting effects from the acquisition including amortization charges from acquired intangible assets and tax-related effects. The pro forma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2023.

3. REVENUE

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of revenue recognition, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregated revenue is presented for each of our reportable segments, CSG and EISG.


	Three Months Ended
	January 31,
	2024						2023
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Region
Americas	$	417	$	97	$	514	$	452	$	109	$	561
Europe	132		123		255		147		110		257
Asia Pacific	290		200		490		340		223		563
Total revenue	$	839	$	420	$	1,259	$	939	$	442	$	1,381

End Market
Aerospace, Defense & Government	$	295	$	—	$	295	$	310	$	—	$	310
Commercial Communications	544		—		544		629		—		629
Electronic Industrial	—		420		420		—		442		442
Total revenue	$	839	$	420	$	1,259	$	939	$	442	$	1,381

Timing of Revenue Recognition
Revenue recognized at a point in time	$	654	$	346	$	1,000	$	777	$	380	$	1,157
Revenue recognized over time	185		74		259		162		62		224
Total revenue	$	839	$	420	$	1,259	$	939	$	442	$	1,381

Our point-in-time revenues are generated predominantly from the sale of various types of design and test software and hardware, and per-incident repair and calibration services. Perpetual software and the portion of term software subscription revenue in this category represents revenue recognized upfront upon transfer of control at the time of electronic delivery. Revenue on per-incident repair and calibration services is recognized when services are performed. Over-time revenues are generated predominantly from the repair and calibration contracts, extended warranties, technical support for hardware and software, certain software subscription and Software as a Service ("SaaS") product offerings, and professional services. Technical support for software and when-and-if available software updates and upgrades are sold either together with our software licenses and software subscriptions, including SaaS, or separately as part of our customer support programs.

Additionally, we provide custom solutions that include combinations of hardware, software, software subscriptions, installation, professional services, and other support services, and revenue may be recognized either up front on delivery or over time depending upon the terms of the contract.

Contract Balances

Contract assets

Contract assets consist of unbilled receivables and are recorded when revenue is recognized in advance of scheduled billings to our customers. These amounts are primarily related to solutions and support arrangements when transfer of control has occurred but we have not yet invoiced. The contract assets balance was $53 million and $58 million as of January 31, 2024 and October 31, 2023, respectively, and is included in "accounts receivables, net" and "other assets" in our condensed consolidated balance sheet.

Contract costs

We capitalize direct and incremental costs incurred to acquire contracts for which the associated revenue is expected to be recognized in future periods. We have determined that certain employee and third-party representative commission programs meet the requirements to be capitalized. These costs are initially deferred and typically amortized over the term of the customer contract which corresponds to the period of benefit. Capitalized contract costs were $40 million and $43 million as of January

31, 2024 and October 31, 2023, respectively, and are included in “other current assets” and “other assets” in the condensed consolidated balance sheet. The amortization expense associated with these capitalized costs was $16 million and $19 million for the three months ended January 31, 2024 and 2023, respectively.

Contract liabilities

Our contract liabilities consist of deferred revenue that arises when we receive consideration in advance of providing the goods or services promised in the contract. Contract liabilities are primarily generated from customer deposits received in advance of shipments for products or rendering of services and are recognized as revenue when products are shipped or services are provided to the customer. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue.

The following table provides a roll-forward of our contract liabilities, current and non-current:


	Three Months Ended
	January 31,
	2024
	(in millions)
Balance at October 31, 2023	$	757
Deferral of revenue billed in current period, net of recognition	250
Deferred revenue arising out of acquisitions	15
Revenue recognized that was deferred as of the beginning of the period	(224)
Foreign currency translation impact	7
Balance at January 31, 2024	$	805

Remaining Performance Obligations

Our remaining performance obligations, excluding contracts that have an original expected duration of one year or less, was approximately $604 million as of January 31, 2024, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. As of January 31, 2024, we expect to fulfill 42 percent of these remaining performance obligations during the remainder of 2024, 38 percent during 2025, and 20 percent thereafter.

4. SHARE-BASED COMPENSATION

Keysight accounts for share-based awards in accordance with the provisions of the authoritative accounting guidance, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including restricted stock units ("RSUs"), employee stock purchases made under our Employee Stock Purchase Plan (“ESPP”), and performance share awards granted to selected members of our senior management under the Long-Term Performance (“LTP”) Program, based on estimated fair values. The impact of share-based compensation expense on our condensed consolidated statement of operations was as follows:


	Three Months Ended
	January 31,
		2024		2023
		(in millions)
Cost of products and services		$	8	$	9
Research and development		13		16
Selling, general and administrative		29		30
Total share-based compensation expense		$	50	$	55

For the three months ended January 31, 2024, the total share based compensation includes $5 million of ESI Group acquisition-related compensation to redeem certain outstanding unvested stock awards as of the date of the acquisition that were determined to relate to post-merger service periods. See Note 2, Acquisitions, for additional details. Share-based compensation capitalized within inventory was $4 million as of January 31, 2024 and 2023.

Performance awards based on total shareholder return ("TSR") are valued using a Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. The valuation is done once every year in the first quarter at the time of annual grants. The estimated fair value of RSUs and the financial metrics-based performance awards (both operating margin and earnings per share) is determined based on the market price of Keysight’s common stock on the grant date. The compensation cost for financial metrics-based performance awards reflects the cost of awards that are probable to vest at the end of the performance period.

The following assumptions were used to estimate the fair value of TSR-based performance awards:


	Three Months Ended
	January 31,
		2024		2023
Volatility of Keysight shares		29	%	35	%
Volatility of S&P 500 Total Return index		18	%	25	%
Price-wise correlation with selected peers		69	%	75	%

5. INCOME TAXES

The following table provides income tax details:


	Three Months Ended
	January 31,
		2024			2023
in millions, except percentages
Income before taxes		$	229		$	331
Provision for income taxes		$	57		$	71
Effective tax rate		24.5		%	21.5		%

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

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

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

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, 2018 through the current tax year. For certain non-U.S. entities, the tax years remain open, at most, back to the year 2008.

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

At this time, management does not believe that the outcome of any future or currently ongoing examination will have a material impact on our consolidated financial statements. 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. Given the numerous tax years and matters that remain subject to examination in various tax jurisdictions, the ultimate resolution of current and future tax examinations could be inconsistent with management’s current expectations. If that were to occur, it could have an impact on our effective tax rate in the period in which such examinations are resolved.

6. NET INCOME PER SHARE

The following table presents the calculation of basic and diluted net income per share:


	Three Months Ended
	January 31,
		2024		2023
in millions, except per-share amounts
Net income		$	172	$	260
Basic weighted-average shares		175		178
Potential common shares		1		2
Diluted weighted-average shares		176		180
Net income per share - basic		$	0.98	$	1.46
Net income per share - diluted		$	0.98	$	1.45

Diluted shares outstanding primarily include the dilutive effect of non-vested RSUs and in-the-money options. The diluted effect of such awards is calculated based on the average share price of each period using the treasury stock method, except where the inclusion of such awards would have an anti-dilutive impact. Anti-dilutive shares excluded from the calculation of diluted earnings per share were 0.7 million for the three months ended January 31, 2024. The impact was immaterial for the three months ended January 31, 2023.

7. GOODWILL AND OTHER INTANGIBLE ASSETS

The goodwill balance as of January 31, 2024 and October 31, 2023 and the activity for the three months ended January 31, 2024 for each of our reportable operating segments were as follows:


	CSG		EISG		Total
	(in millions)
Goodwill at October 31, 2023	$	1,057	$	583	$	1,640
Foreign currency translation impact	6		5		11
Goodwill arising from acquisitions	73		530		603
Goodwill at January 31, 2024	$	1,136	$	1,118	$	2,254

There were no impairments for the three months ended January 31, 2024 and 2023. As of January 31, 2024 and October 31, 2023, accumulated impairment losses on goodwill was $709 million.

Other intangible assets as of January 31, 2024 and October 31, 2023 consisted of the following:


	January 31, 2024						October 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Developed technology	$	1,305	$	965	$	340	$	1,033	$	949	$	84
Backlog	34		19		15		19		17		2
Trademark/Tradename	39		34		5		36		33		3
Customer relationships	568		359		209		406		340		66

Total amortizable intangible assets	$	1,946	$	1,377	$	569	$	1,494	$	1,339	$	155
In-Process R&D	47		—		47		—		—		—
Total	$	1,993	$	1,377	$	616	$	1,494	$	1,339	$	155

During the three months ended January 31, 2024, we recognized additions to goodwill and other intangible assets of $603 million and $494 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the acquisition of ESI Group. The goodwill was assigned to CSG and EISG reportable segments, based on the expected benefits and synergies that are likely to be realized from the ESI Group acquisition. See Note 2, Acquisitions*,* for additional details.

Goodwill is assessed for impairment on a reporting unit basis at least annually in the fourth quarter of each year, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The company has not identified any triggering events that indicate an impairment of goodwill for the three months ended January 31, 2024.

During the three months ended January 31, 2024, foreign exchange translation impact resulted in increasing other intangible assets by $5 million. Amortization of other intangible assets was $38 million and $23 million for the three months ended January 31, 2024 and 2023, respectively.

Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:


	Amortization expense
	(in millions)
2024 (remainder)	$	93
2025	$	113
2026	$	102
2027	$	90
2028	$	87
Thereafter	$	84

8. FAIR VALUE MEASUREMENTS

The authoritative guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The guidance establishes a fair value hierarchy that prioritizes inputs used in valuation techniques into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in less active markets; or other inputs that can be derived principally from, or corroborated by, observable market data.

Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of January 31, 2024 and October 31, 2023 were as follows:


	Fair Value Measurements at
	January 31, 2024										October 31, 2023
	Total		Level 1		Level 2		Level 3		Other		Total		Level 1		Level 2		Level 3		Other
	(in millions)
Assets:
Short-term

Money market funds	$	1,163	$	1,163	$	—	$	—	$	—	$	1,934	$	1,934	$	—	$	—	$	—
Derivative instruments (foreign exchange contracts)	14		—		14		—		—		18		—		18		—		—
Long-term

Equity investments	62		62		—		—		—		56		56		—		—		—
Other investments	28		—		—		—		28		25		—		—		—		25
Total assets measured at fair value	$	1,267	$	1,225	$	14	$	—	$	28	$	2,033	$	1,990	$	18	$	—	$	25
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	9	$	—	$	9	$	—	$	—	$	54	$	—	$	54	$	—	$	—
Long-term
Deferred compensation liability	30		—		30		—		—		27		—		27		—		—
Total liabilities measured at fair value	$	39	$	—	$	39	$	—	$	—	$	81	$	—	$	81	$	—	$	—

Net realized gain (loss) on sale of our equity and other investments was zero for both the three months ended January 31, 2024 and 2023. Net unrealized gain (loss) on our equity and other investments was a gain of $7 million and $8 million for the three months ended January 31, 2024 and 2023, respectively.

Our money market funds and equity investments with readily determinable fair values are measured at fair value using quoted market prices and, therefore, are classified within Level 1 of the fair value hierarchy. Equity and fixed income investments or convertible notes without readily determinable fair values that are either measured at cost, adjusted for observable changes in price or impairments, or accounted for under a measurement alternative are not categorized in the fair value hierarchy and are presented as "other investments" in the table above. Our deferred compensation liability is classified as Level 2 because the inputs used in the calculations are observable, although the values are not directly based on quoted market prices. Our derivative financial instruments are classified within Level 2 as there is not an active market for each hedge contract, but the inputs used to calculate the value of the instruments are tied to active markets.

Equity investments, including securities that are earmarked to pay the deferred compensation liability, and the deferred compensation liability are reported at fair value, with gains or losses resulting from changes in fair value recognized in earnings. Certain derivative instruments are reported at fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss).

9. DERIVATIVES

We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts, to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates.

Cash Flow Hedges

We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities based on a rolling period of up to twelve months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance.

In 2020, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of $600 million associated with future interest payments on anticipated debt issuances through fiscal year 2024. In 2023, we terminated the interest rate swap agreements, resulting in a deferred gain of $107 million recognized in accumulated other comprehensive

income (loss) to be amortized to interest expense over the term of the anticipated debt. As part of the ESI Group acquisition, we assumed two interest rate swap agreements with an aggregate notional amount of 5 million euros to hedge the variable interest rate of the syndicate loan.

Non-designated Hedges

Additionally, we periodically enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries.

In connection with the acquisition of the ESI Group, we entered into foreign exchange forward contracts to mitigate the currency exchange risk associated with the payment of the purchase price in Euro. The aggregate notional amount of the currencies hedged was 930 million euros as of October 31, 2023. These foreign exchange contracts did not qualify for hedge accounting treatment and were not designated as hedging instruments. During the three months ended January 31, 2024, these foreign exchange forward contracts were settled using existing cash of $63 million, resulting in a loss of $18 million recorded in “other income (expense), net.”

The aggregate number of open foreign exchange forward contracts designated as "cash flow hedges" and "not designated as hedging instruments" was 179 and 72, respectively, as of January 31, 2024. The net notional amounts by currency and designation as of January 31, 2024 were as follows:


	Derivatives in Cash Flow Hedging Relationships		Derivatives Not Designated as Hedging Instruments
	Forward Contracts			Forward Contracts
Currency	Buy/(Sell)			Buy/(Sell)
	(in millions)
Euro	$	—		$	77
British Pound	2			(3)
Singapore Dollar	33			48

Malaysian Ringgit	110			4
Japanese Yen	(124)			(70)
Other currencies	(29)			(41)
Total	$	(8)		$	15

Derivative instruments are subject to master netting arrangements and are disclosed gross in the condensed consolidated balance sheet. The gross fair values and balance sheet presentation of derivative instruments held as of January 31, 2024 and October 31, 2023 were as follows:


Fair Values of Derivative Instruments
Assets Derivatives					Liabilities Derivatives
	Fair Value					Fair Value
Balance Sheet Location	January 31, 2024		October 31, 2023		Balance Sheet Location	January 31, 2024		October 31, 2023
(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts
Other current assets	$	8	$	16	Other accrued liabilities	$	4	$	7



Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current assets	6		2		Other accrued liabilities	5		47
Total derivatives	$	14	$	18		$	9	$	54

The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and for those not designated as hedging instruments in our condensed consolidated statement of operations was as follows:


	Three Months Ended
	January 31,
		2024		2023
		(in millions)
Derivatives designated as hedging instruments:
Cash Flow Hedges
Interest rate swap contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)		$	—	$	(24)
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)		$	(3)	$	(3)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings:
Cost of products		$	3	$	4
Selling, general and administrative		$	(1)	$	(2)



Gain (loss) excluded from effectiveness testing recognized in earnings based on amortization approach:
Cost of products		$	1	$	1
Selling, general and administrative		$	—	$	—
Derivatives not designated as hedging instruments:
Gain (loss) recognized in:

Other income (expense), net		$	(17)	$	(4)

The estimated amount at January 31, 2024 expected to be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months is a gain of $5 million.

10. DEBT

The following table summarizes the components of our debt:


	January 31, 2024		October 31, 2023
	(in millions)
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of zero and $1)	$	600	$	599
2027 Senior Notes at 4.60% ($700 face amount less unamortized costs of $2 and $2)	698		698
2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $3 and $3)	497		497
ESI Group debt assumed:
Syndicated loan	11		—
State-guaranteed loans	10		—
Other bank borrowings	1		—
Total debt	1,817		1,794
Less: Current portion of long-term debt	609		599
Long-Term Debt	$	1,208	$	1,195

Revolving Credit Facility

On July 30, 2021, we entered into an amended and restated credit agreement (the “Revolving Credit Facility”) which provides 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. On February 17, 2023, we entered into the first amendment to the Revolving Credit Facility to change the annual interest rate from LIBOR + 1 percent to SOFR + 1.1 percent. In addition, 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. As of January

31, 2024 and October 31, 2023, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the three months ended January 31, 2024.

As part of the ESI Group acquisition, we assumed a 10 million euros revolving credit facility that expires in April 2025. As of January 31, 2024, we had no borrowings outstanding under the credit facility.

Senior Notes

There have been no changes to the principal, maturity, interest rates and interest payment terms of the senior notes during the three months ended January 31, 2024 as compared to the senior notes described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023. We were in compliance with the covenants of our senior notes during the three months ended January 31, 2024.

ESI Group debt assumed

As part of the ESI Group acquisition, we assumed debt of $24 million, including $10 million payable within one year. The debt includes a syndicated loan of $11 million payable through yearly installments until April 2025 with an annual interest rate of EURIBOR + 2 to 2.5 percent. We also assumed various fixed interest rate state-guaranteed loans and other bank borrowings of $13 million. During the three months ended January 31, 2024, we repaid $1 million of the state-guaranteed loans.

As of January 31, 2024 and October 31, 2023, we had $42 million and $41 million, respectively, of outstanding letters of credit and surety bonds unrelated to the credit facility that were issued by various lenders.

The fair value of our debt, which is calculated from quoted prices that are primarily Level 1 inputs under the accounting guidance fair value hierarchy is approximately $1,767 million and $1,679 million as of January 31, 2024 and October 31, 2023, respectively.

11. RETIREMENT PLANS AND POST-RETIREMENT BENEFIT PLANS

For the three months ended January 31, 2024 and 2023, our net pension and post-retirement benefit cost (benefit) consisted of the following:


	Pensions
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				U.S. Post-Retirement Benefit Plan
	Three Months Ended
	January 31,
	2024		2023		2024		2023		2024		2023
	(in millions)
Service cost—benefits earned during the period	$	4	$	4	$	2	$	2	$	—	$	—
Interest cost on benefit obligation	10		9		9		7		2		2
Expected return on plan assets	(12)		(12)		(13)		(12)		(3)		(3)

Amortization of net actuarial loss	2		2		2		2		—		—


Net periodic benefit cost (benefit)	$	4	$	3	$	—	$	(1)	$	(1)	$	(1)

We record the service cost component of net periodic benefit cost (benefit) in the same line item as other employee compensation costs. The non-service components of net periodic benefit cost (benefit), such as interest cost, expected return on assets, amortization of prior service cost, and actuarial gains or losses, are recorded within "other income (expense), net" in the condensed consolidated statement of operations.

We did not contribute to our U.S. defined benefit plans or U.S. post-retirement benefit plan during the three months ended January 31, 2024 and 2023. We contributed $3 million to our non-U.S. defined benefit plans during the three months ended January 31, 2024 and 2023.

For the remainder of 2024, 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 $8 million to our non-U.S. defined benefit plans. The amounts we 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, employee retirements, market conditions, interest rates and other factors.

12. SUPPLEMENTAL FINANCIAL INFORMATION

The following tables provide details of selected balance sheet items:

Cash, cash equivalents, and restricted cash


	January 31, 2024		October 31, 2023
	(in millions)
Cash and cash equivalents	$	1,745	$	2,472
Restricted cash included in other current assets	3		—
Restricted cash included in other assets	17		16
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	1,765	$	2,488

Restricted cash relates primarily to deficit reduction contributions to an escrow account for one of our non-U.S. defined benefit pension plans and deposits held as collateral against bank guarantees.

Inventory


	January 31, 2024		October 31, 2023
	(in millions)
Finished goods	$	392	$	376
Purchased parts and fabricated assemblies	632		609
Total inventory	$	1,024	$	985

Leases

The following table summarizes the components of our lease cost:


	Three Months Ended
	January 31,
		2024		2023
	(in millions)
Operating lease cost		$	15	$	13
Variable lease cost		$	7	$	4

Supplemental information related to our operating leases was as follows:


	Three Months Ended
	January 31,
	2024		2023
	(in millions)
Cash payment for operating leases	$	14	$	14
Right-of-use assets obtained in exchange for operating lease obligations	$	12	$	9

Standard warranty

Our 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. We accrue for standard warranty costs based on historical trends in warranty charges. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. Estimated warranty charges are recorded within cost of products at the time related product revenue is recognized.

Activity related to the standard warranty accrual, which is included in other accrued and other long-term liabilities in our condensed consolidated balance sheet, is as follows:


	Three Months Ended
	January 31,
	2024		2023
	(in millions)
Beginning balance	$	36	$	32
Accruals for warranties, including change in estimates	7		9
Settlements made during the period	(7)		(7)
Ending balance	$	36	$	34

Accruals for warranties due within one year	$	22	$	20
Accruals for warranties due after one year	14		14
Ending balance	$	36	$	34

Other current assets


	January 31, 2024		October 31, 2023
	(in millions)
Prepaid assets	$	302	$	284
Other current assets	197		168
Total other current assets	$	499	$	452

Prepaid assets include deposits paid in advance to contract manufacturers of $212 million and $210 million as of January 31, 2024 and October 31, 2023, respectively.

13. COMMITMENTS AND CONTINGENCIES

Commitments

During the three months ended January 31, 2024, there were no material changes to the purchase commitments as reported in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

Contingencies

On August 3, 2021, we entered into a Consent Agreement with the Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, Department of State to resolve alleged violations of the Arms Export Control Act and the International Traffic in Arms Regulations ("ITAR"). 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. The suspended portion of the penalty has been satisfied by amounts we have spent on qualifying compliance activities to date.

On January 1, 2022, Centripetal Networks filed a lawsuit in Federal District Court in Virginia, alleging that certain Keysight products infringe certain of Centripetal’s patents. In addition, in February 2022 Centripetal filed complaints in Germany alleging infringement of certain of Centripetal’s German patents, and in April 2022 Centripetal filed a complaint with the International Trade Commission (“ITC”) requesting that they investigate whether Keysight violated Section 337 of the Tariff Act (“Section 337”) and should be enjoined from importing certain products that are manufactured outside of the U.S. and which are alleged to infringe Centripetal patents. On December 5, 2023, the ITC issued its Notice of Determination that Keysight did not unfairly import products in violation of Section 337 and the investigation was terminated. Centripetal has appealed this determination. We 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. An adverse outcome in any outstanding lawsuit or proceeding could result in significant monetary damages or injunctive relief. If adverse results are above management’s expectations or are unforeseen, management may not have accrued for the liability, which could impact our results in future periods.

We are also involved in lawsuits, claims, investigations and proceedings, including, but not limited to, patent, employment, commercial and environmental matters, which arise in the ordinary course of business.

14. STOCKHOLDERS' EQUITY

Stock Repurchase Program

On March 6, 2023, our board of directors approved a 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.

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. The stock repurchase program may be commenced, suspended or discontinued at any time at the company’s discretion and does not have an expiration date.

For the three months ended January 31, 2024, we repurchased 624,961 shares of common stock for $93 million. For the three months ended January 31, 2023, we repurchased 710,736 shares of common stock for $125 million.

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component and related tax effects for the three months ended January 31, 2024 and 2023 were as follows:


	Foreign currency translation			Net defined benefit pension cost and post-retirement plan costs					Gains (losses) on derivatives		Total
			Actuarial losses			Prior service credits
	(in millions)
As of October 31, 2023	$	(167)		$	(382)		$	(6)	$	89	$	(466)
Other comprehensive income (loss) before reclassifications	27			—			—		(3)		24
Amounts reclassified out of accumulated other comprehensive gain (loss)	—			2			—		(2)		—
Tax benefit (expense)	—			(1)			—		1		—
Other comprehensive income (loss)	27			1			—		(4)		24
As of January 31, 2024	$	(140)		$	(381)		$	(6)	$	85	$	(442)

As of October 31, 2022	$	(185)		$	(373)		$	(6)	$	110	$	(454)
Other comprehensive income (loss) before reclassifications	81			—			—		(27)		54
Amounts reclassified out of accumulated other comprehensive gain (loss)	—			6			—		(2)		4
Tax benefit (expense)	—			(1)			—		6		5
Other comprehensive income (loss)	81			5			—		(23)		63
As of January 31, 2023	$	(104)		$	(368)		$	(6)	$	87	$	(391)

Reclassifications out of accumulated other comprehensive loss into earnings for the three months ended January 31, 2024 and 2023 were as follows:


Details about accumulated other comprehensive loss components		Amounts reclassified from other comprehensive loss				Affected line item in statement of operations
	Three Months Ended
	January 31,
		2024		2023
		(in millions)
Gain (loss) on derivatives		$	3	$	4	Cost of products
		(1)		(2)		Selling, general and administrative
		—		—		Benefit (provision) for income tax
		2		2		Net of income tax

Net defined benefit pension cost and post-retirement plan costs:
Net actuarial loss		(2)		(6)		Other income (expense), net


		1		1		Benefit (provision) for income tax
		(1)		(5)		Net of income tax

Total reclassifications for the period		$	1	$	(3)	Net of income tax

15. SEGMENT INFORMATION

We report our results in two reportable segments: CSG and EISG. The results of our reportable segments are based on our management reporting system and are not necessarily in conformity with GAAP. The performance of each segment is measured based on several metrics, including income from operations. These results are used, in part, by the chief operating decision maker in evaluating the performance of, and in allocating resources to each of the segments.

The profitability of each of the segments is measured after excluding share-based compensation expense, amortization of acquisition-related balances, acquisition and integration costs, restructuring costs, interest income, interest expense and other items as noted in the reconciliations below.


	Three Months Ended
	January 31,
	2024						2023
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Revenue	$	839	$	420	$	1,259	$	939	$	442	$	1,381
Segment income from operations	$	226	$	129	$	355	$	269	$	140	$	409

The following table reconciles total reportable operating segments’ income from operations to our income before taxes, as reported:


	Three Months Ended
	January 31,
		2024		2023
		(in millions)
Total reportable operating segments' income from operations		$	355	$	409
Share-based compensation		(50)		(55)
Amortization of acquisition-related balances		(38)		(23)
Acquisition and integration costs		(17)		(2)
Restructuring and others		(29)		(7)
Income from operations, as reported		221		322
Interest income		23		19
Interest expense		(20)		(19)
Other income (expense), net		5		9
Income before taxes, as reported		$	229	$	331

The following table presents segment assets directly managed by each segment:


	January 31, 2024						October 31, 2023
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Segment assets	$	4,463	$	2,949	$	7,412	$	4,410	$	1,920	$	6,330

The increase in segment assets for the three months ended January 31, 2024 primarily represents assets acquired as part of the ESI Group acquisition. See Note 2, Acquisitions, for additional information.

The following table reconciles segment assets to our total assets:


	January 31, 2024		October 31, 2023
	(in millions)
Total reportable segments' assets	$	7,412	$	6,330
Cash and cash equivalents	1,745		2,472

Long-term investments	90		81
Long-term deferred tax assets	662		671
Accumulated amortization of other intangibles	(1,377)		(1,339)
Pension and other assets	528		468
Total assets	$	9,060	$	8,683

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