UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED JULY 31, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 001-36334

KEYSIGHT TECHNOLOGIES, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


Delaware			46-4254555
(State or other jurisdiction of			(IRS employer
incorporation or organization)			Identification no.)

~~Delaware~~			~~46-4254555~~
~~(State or other jurisdiction of~~	~~(IRS employer~~
~~incorporation or organization)~~	~~Identification no.)~~

1400 Fountaingrove Parkway
Santa Rosa		California	95403
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (800) 829-4444

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	KEYS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the exchange act.


Large accelerated filer		☒			Accelerated filer		☐

~~Large accelerated filer~~		☒	~~Accelerated filer~~	☐

Non-accelerated filer	☐		Smaller reporting company			☐

Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a)of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding at August ~~28, 2020~~27, 2021 was ~~187,139,371.~~184,195,849.

~~KEYSIGHT TECHNOLOGIES, INC.~~

Table of Contents

TABLE OF CONTENTS


~~PART I~~	~~— FINANCIAL INFORMATION~~

~~ITEM 1. CONDENSED CONSOLIDATED~~

Table of Contents

PART I. FINANCIAL ~~STATEMENTS (UNAUDITED)~~INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

~~(unaudited)~~(Unaudited)


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
Revenue:
Products	$	1,021	$	813	$	2,987	$	2,423
Services and other	225		198		660		578
Total revenue	1,246		1,011		3,647		3,001
Costs and expenses:
Cost of products	370		330		1,151		992
Cost of services and other	88		75		264		232
Total costs	458		405		1,415		1,224
Research and development	207		169		615		522
Selling, general and administrative	302		259		900		810
Other operating expense (income), net	(5)		(4)		(14)		(42)
Total costs and expenses	962		829		2,916		2,514
Income from operations	284		182		731		487
Interest income	1		1		2		11
Interest expense	(20)		(20)		(59)		(59)
Other income (expense), net	5		22		(1)		56
Income before taxes	270		185		673		495
Provision for income taxes	16		9		61		85
Net income	$	254	$	176	$	612	$	410

Net income per share:
Basic	$	1.38	$	0.94	$	3.31	$	2.19
Diluted	$	1.36	$	0.93	$	3.27	$	2.16

Weighted average shares used in computing net income per share:
Basic	184		187		185		187
Diluted	186		190		187		190

Three Months Ended Nine Months Ended
July 31, July 31,
2020 2019 2020 2019
Net revenue:

Products $ 813
$ 904
$ 2,423
$ 2,652
Services and other 198
183
578
531
Total net revenue 1,011
1,087
3,001
3,183
Costs and expenses:
Cost of products 330
361
992
1,068
Cost of services and other 75
83
232
246
Total costs 405
444
1,224
1,314
Research and development 169
168
522
512
Selling, general and administrative 259
281
810
869
Other operating expense (income), net (4 ) (3 ) (42 ) (15 )
Total costs and expenses 829
890
2,514
2,680
Income from operations 182
197
487
503
Interest income 1
7
11
17
Interest expense (20 ) (20 ) (59 ) (60 )
Other income (expense), net 22
15
56
52
Income before taxes 185
199
495
512
Provision for income taxes 9
40
85
86
Net income $ 176
$ 159
$ 410
$ 426

Net income per share:

Basic $ 0.94
$ 0.85
$ 2.19
$ 2.27
Diluted $ 0.93
$ 0.83
$ 2.16
$ 2.23

Weighted average shares used in computing net income per share:
Basic 187
188
187
188
Diluted 190
191
190
191

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

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

~~(unaudited)~~(Unaudited)


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
Net income	$	254	$	176	$	612	$	410
Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $7, zero, $(4)and $2	(22)		—		18		(7)
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero	(1)		1		(1)		3
Foreign currency translation, net of tax benefit (expense) of zero	(7)		37		10		30
Net defined benefit pension cost and post retirement plan costs:
Change in net actuarial loss, net of tax expense of $6, $4, $16 and $8	13		11		44		39
Change in net prior service credit, net of tax benefit of zero, $1, zero and $2	—		(2)		—		(7)
Other comprehensive income (loss)	(17)		47		71		58
Total comprehensive income	$	237	$	223	$	683	$	468

Three Months Ended Nine Months Ended
July 31, July 31,
2020 2019 2020 2019
Net income $ 176
$ 159
$ 410
$ 426
Other comprehensive income (loss):
Unrealized loss on derivative instruments, net of tax benefit of zero, zero, $2 and zero 0
(1 ) (7 ) (3 )
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero 1
0
3
1
Foreign currency translation, net of tax benefit (expense) of zero 37
(4 ) 30
10
Net defined benefit pension cost and post retirement plan costs:
Change in net actuarial loss, net of tax expense of $4, $3, $8 and $10 11
9
39
30
Change in net prior service credit, net of tax benefit of $1, $2, $2 and $4 (2 ) (3 ) (7 ) (10 )
Other comprehensive income 47
1
58
28
Total comprehensive income $ 223
$ 160
$ 468
$ 454

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

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions, except par value and share data)

~~(unaudited)~~(Unaudited)


	July 31, 2020			October 31, 2019				July 31, 2021		October 31, 2020
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	1,697		$	1,598		Cash and cash equivalents	$	2,153	$	1,756

Accounts receivable, net	569			668			Accounts receivable, net	677		606
Inventory	778			705			Inventory	770		757
Other current assets	234			244			Other current assets	229		255
Total current assets	3,278			3,215			Total current assets	3,829		3,374
Property, plant and equipment, net	584			576			Property, plant and equipment, net	616		595
Operating lease right-of-use assets	187			0			Operating lease right-of-use assets	231		182
Goodwill	1,510			1,209			Goodwill	1,610		1,537
Other intangible assets, net	419			490			Other intangible assets, net	283		361
Long-term investments	62			46			Long-term investments	68		61
Long-term deferred tax assets	746			755			Long-term deferred tax assets	739		740
Other assets	375			332			Other assets	428		368
Total assets	$	7,161		$	6,623		Total assets	$	7,804	$	7,218
LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities:							Current liabilities:

Accounts payable	$	193		$	253		Accounts payable	$	249	$	224
Employee compensation and benefits	230			278			Employee compensation and benefits	294		289
Deferred revenue	386			334			Deferred revenue	476		391
Income and other taxes payable	40			55			Income and other taxes payable	47		64
Operating lease liabilities	43			0			Operating lease liabilities	41		43
Other accrued liabilities	88			83			Other accrued liabilities	92		70
Total current liabilities	980			1,003			Total current liabilities	1,199		1,081

Long-term debt	1,789			1,788			Long-term debt	1,791		1,789
Retirement and post-retirement benefits	352			357			Retirement and post-retirement benefits	348		362
Long-term deferred revenue	173			176			Long-term deferred revenue	179		175
Long-term operating lease liabilities	155			0			Long-term operating lease liabilities	196		149
Other long-term liabilities	358			295			Other long-term liabilities	341		365
Total liabilities	3,807			3,619			Total liabilities	4,054		3,921
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)	0		0

Stockholders’ equity:							Stockholders’ equity:
Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding	0			0			Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding	—		—
Common stock; $0.01 par value; 1 billion shares authorized; 196 million shares at July 31, 2020 and 194 million shares at October 31, 2019 issued	2			2
Treasury stock at cost; 8.5 million shares at July 31, 2020 and 6.5 million shares at October 31, 2019	(537		)	(342		)
Common stock; $0.01 par value; 1 billion shares authorized; 197 million shares at July 31, 2021 and 196 million shares at October 31, 2020 issued							Common stock; $0.01 par value; 1 billion shares authorized; 197 million shares at July 31, 2021 and 196 million shares at October 31, 2020 issued	2		2
Treasury stock at cost; 13.0 million shares at July 31, 2021 and 10.7 million shares at October 31, 2020							Treasury stock at cost; 13.0 million shares at July 31, 2021 and 10.7 million shares at October 31, 2020	(1,072)		(752)
Additional paid-in-capital	2,090			2,013			Additional paid-in-capital	2,200		2,110
Retained earnings	2,319			1,909			Retained earnings	3,148		2,536
Accumulated other comprehensive loss	(520		)	(578		)	Accumulated other comprehensive loss	(528)		(599)
Total stockholders' equity	3,354			3,004			Total stockholders' equity	3,750		3,297
Total liabilities and equity	$	7,161		$	6,623		Total liabilities and equity	$	7,804	$	7,218

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

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

~~(unaudited)~~(Unaudited)

Nine Months Ended
July 31,
2020 2019
Cash flows from operating activities:

Net income $ 410
$ 426
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 76
72
Amortization 163
157
Share-based compensation 72
66
Deferred tax expense 7
14
Excess and obsolete inventory-related charges 21
20
Gain on insurance proceeds received for damage to property, plant and equipment (32 ) 0
Other non-cash expense (income), net (10 ) (5 )
Changes in assets and liabilities:

Accounts receivable 112
25
Inventory (91 ) (78 )
Accounts payable (60 ) 10
Employee compensation and benefits (57 ) (55 )
Deferred revenue 35
103
Income taxes payable 8
(11 )
Retirement and post-retirement benefits (9 ) (33 )
Other assets and liabilities 33
24
Net cash provided by operating activities 678
735

Cash flows from investing activities:

Investments in property, plant and equipment (87 ) (90 )
Insurance proceeds received for damage to property, plant and equipment 32
0
Acquisition of businesses and intangible assets, net of cash acquired (324 ) (90 )
Proceeds from sale of investments 0
7
Other investing activities 0
4
Net cash used in investing activities (379 ) (169 )

Cash flows from financing activities:

Proceeds from issuance of common stock under employee stock plans 57
65
Payment of taxes related to net share settlement of equity awards (52 ) (26 )
Repayment of debt (7 ) 0
Treasury stock repurchases (196 ) (130 )
Net cash used in financing activities (198 ) (91 )

Effect of exchange rate movements 2
4

Net increase in cash, cash equivalents, and restricted cash 103
479
Cash, cash equivalents, and restricted cash at beginning of period 1,600
917
Cash, cash equivalents, and restricted cash at end of period $ 1,703
$ 1,396


	Nine Months Ended
	July 31,
	2021		2020
Cash flows from operating activities:
Net income	$	612	$	410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	87		76
Amortization	149		163
Share-based compensation	83		72
Deferred tax expense (benefit)	(49)		7
Excess and obsolete inventory-related charges	20		21
Loss on settlement of pension plan	16		—
Gain on insurance proceeds received for damage to property, plant and equipment	—		(32)
Other non-cash expense (income), net	7		(10)
Changes in assets and liabilities:
Accounts receivable	(64)		112
Inventory	(30)		(91)
Accounts payable	10		(60)
Employee compensation and benefits	(12)		(57)
Deferred revenue	86		35
Income taxes payable	8		8
Retirement and post-retirement benefits	5		(9)
Other assets and liabilities	26		33
Net cash provided by operating activities	954		678

Cash flows from investing activities:
Investments in property, plant and equipment	(101)		(87)
Acquisition of businesses and intangible assets, net of cash acquired	(136)		(324)
Insurance proceeds received for damage to property, plant and equipment	—		32
Other investing activities	(1)		—
Net cash used in investing activities	(238)		(379)

Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans	59		57
Payment of taxes related to net share settlement of equity awards	(53)		(52)
Treasury stock repurchases	(320)		(196)
Payment of acquisition-related contingent consideration	(2)		—
Repayment of debt	—		(7)
Other financing activities	(1)		—
Net cash used in financing activities	(317)		(198)

Effect of exchange rate movements	4		2

Net increase in cash, cash equivalents, and restricted cash	403		103
Cash, cash equivalents, and restricted cash at beginning of period	1,767		1,600
Cash, cash equivalents, and restricted cash at end of period	$	2,170	$	1,703

Supplemental cash flow information:
Interest payments	$	37	$	38
Income tax paid, net	$	100	$	66
Investments in property, plant and equipment included in accounts payable	$	27	$	10

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

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

~~(unaudited)~~(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		Total Stockholders' Equity
Balance as of April 30, 2021	196,901	$	2	$	2,152	(12,461)	$	(992)	$	2,894	$	(511)	$	3,545
Net income	—	—		—		—	—		254		—		254
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		(17)		(17)
Issuance of common stock	318	—		30		—	—		—		—		30
Taxes related to net share settlement of equity awards	—	—		(1)		—	—		—		—		(1)
Share-based compensation	—	—		19		—	—		—		—		19
Repurchase of common stock	—	—		—		(569)	(80)		—		—		(80)
Balance as of July 31, 2021	197,219	$	2	$	2,200	(13,030)	$	(1,072)	$	3,148	$	(528)	$	3,750

Balance as of October 31, 2020	195,661	$	2	$	2,110	(10,732)	$	(752)	$	2,536	$	(599)	$	3,297
Net income	—	—		—		—	—		612		—		612
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		71		71
Issuance of common stock	1,558	—		59		—	—		—		—		59
Taxes related to net share settlement of equity awards	—	—		(52)		—	—		—		—		(52)
Share-based compensation	—	—		83		—	—		—		—		83
Repurchase of common stock	—	—		—		(2,298)	(320)		—		—		(320)
Balance as of July 31, 2021	197,219	$	2	$	2,200	(13,030)	$	(1,072)	$	3,148	$	(528)	$	3,750

Balance as of April 30, 2020	195,107	$	2	$	2,044	(8,505)	$	(537)	$	2,143	$	(567)	$	3,085
Net income	—	—		—		—	—		176		—		176
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		47		47
Issuance of common stock	529	—		31		—	—		—		—		31
Taxes related to net share settlement of equity awards	—	—		(2)		—	—		—		—		(2)
Share-based compensation	—	—		17		—	—		—		—		17
Repurchase of common stock	—	—		—		—	—		—		—		—
Balance as of July 31, 2020	195,636	$	2	$	2,090	(8,505)	$	(537)	$	2,319	$	(520)	$	3,354

Balance as of October 31, 2019	193,769	$	2	$	2,013	(6,458)	$	(342)	$	1,909	$	(578)	$	3,004
Net income	—	—		—		—	—		410		—		410
Other comprehensive income (loss), net of tax	—	—		—		—	—		—		58		58
Issuance of common stock	1,867	—		57		—	—		—		—		57
Taxes related to net share settlement of equity awards	—	—		(52)		—	—		—		—		(52)
Share-based compensation	—	—		72		—	—		—		—		72
Repurchase of common stock	—	—		—		(2,047)	(195)		—		—		(195)
Balance as of July 31, 2020	195,636	$	2	$	2,090	(8,505)	$	(537)	$	2,319	$	(520)	$	3,354

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 Total Stockholders' Equity
Balance as of April 30, 2020 195,107
$ 2
$ 2,044
(8,505 ) $ (537 ) $ 2,143
$ (567 ) $ 3,085
Net income —
—
—
—
—
176
—
176
Other comprehensive income, net of tax —
—
—
—
—
—
47
47
Issuance of common stock 529
—
31
—
—
—
—
31
Taxes related to net share settlement of equity awards —
—
(2 ) —
—
—
—
(2 )
Share-based compensation —
—
17
—
—
—
—
17
Repurchase of common stock —
—
—
0
0
—
—
0
Balance as of July 31, 2020 195,636
$ 2
$ 2,090
(8,505 ) $ (537 ) $ 2,319
$ (520 ) $ 3,354

Balance as of October 31, 2019 193,769
$ 2
$ 2,013
(6,458 ) $ (342 ) $ 1,909
$ (578 ) $ 3,004
Net income —
—
—
—
—
410
—
410
Other comprehensive income, net of tax —
—
—
—
—
—
58
58
Issuance of common stock 1,867
—
57
—
—
—
—
57
Taxes related to net share settlement of equity awards —
—
(52 ) —
—
—
—
(52 )
Share-based compensation —
—
72
—
—
—
—
72
Repurchase of common stock —
—
—
(2,047 ) (195 ) —
—
(195 )
Balance as of July 31, 2020 195,636
$ 2
$ 2,090
(8,505 ) $ (537 ) $ 2,319
$ (520 ) $ 3,354

Balance as of April 30, 2019 193,217
$ 2
$ 1,954
(5,394 ) $ (252 ) $ 1,555
$ (461 ) $ 2,798
Net income —
—
—
—
—
159
—
159
Other comprehensive income, net of tax —
—
—
—
—
—
1
1
Issuance of common stock 437
—
26
—
—
—
—
26
Taxes related to net share settlement of equity awards —
—
(2 ) —
—
—
—
(2 )
Share-based compensation —
—
16
—
—
—
—
16
Repurchase of common stock —
—
—
(760 ) (60 ) —
—
(60 )
Balance as of July 31, 2019 193,654
$ 2
$ 1,994
(6,154 ) $ (312 ) $ 1,714
$ (460 ) $ 2,938

Balance as of October 31, 2018 191,204
$ 2
$ 1,889
(4,364 ) $ (182 ) $ 1,212
$ (488 ) $ 2,433
Adjustment due to adoption of new accounting standards —
—
—
—
—
76
—
76
Net income —
—
—
—
—
426
—
426
Other comprehensive income, net of tax —
—
—
—
—
—
28
28
Issuance of common stock 2,450
—
65
—
—
—
—
65
Taxes related to net share settlement of equity awards —
—
(26 ) —
—
—
—
(26 )
Share-based compensation —
—
66
—
—
—
—
66
Repurchase of common stock —
—
—
(1,790 ) (130 ) —
—
(130 )
Balance as of July 31, 2019 193,654
$ 2
$ 1,994
(6,154 ) $ (312 ) $ 1,714
$ (460 ) $ 2,938

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

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(UNAUDITED)~~(Unaudited)


1.	~~OVERVIEW, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview.Keysight Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.

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

Basis of ~~Presentation.~~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 July 31, ~~2020~~2021 and October 31, ~~2019, our~~2020, results of operations for the three and nine months ended July 31, ~~2020~~2021 and ~~2019~~2020 and cash flows for the nine months ended July 31, ~~2020~~2021 and ~~2019.~~2020.

Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and our markets. 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 July 31, 2020. 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.

Update to Significant Accounting Policies.~~Except as set forth in Note 2, "New Accounting Pronouncements," there~~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, ~~2019.~~


2.	~~NEW ACCOUNTING PRONOUNCEMENTS~~

~~In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 or Accounting Standards Codification Topic 842,~~ ~~Leases~~ (“ASC 842”), that requires substantially all leases to be reported on the balance sheet as right-of-use (“ROU”) assets and lease obligations and also requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.2020.

~~We adopted~~New Accounting Pronouncements. Accounting standard updates during the ~~standard on November 1, 2019, using the modified retrospective transition approach provided by ASU 2018-11,~~ ~~Leases: Targeted Improvements, with the cumulative effect~~first nine months of initially applying the standard recognized at the date of adoption. Under this method of adoption, comparative information has not been restated and continues to be reported under the standards in effect (ASC 840) for the prior periods presented. Adoption of the standard resulted in recording ROU assets and lease obligations for our operating leases of approximately $155 million and $164 million, respectively, but did not have a material impact on beginning retained earnings, the condensed consolidated statement of operations, cash flows, or earnings per share.

We elected the package of practical expedients for leases that commenced before the effective date of ASC 842, whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification

for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, we have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes and account for them as a single lease component. Our finance lease and lessor arrangements are immaterial.

~~ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.~~ In August 2018, the FASB issued guidance that requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance to determine which implementation costs to defer and recognize as an asset and aligns the recognition of implementation costs to those incurred in an arrangement that includes an internal-use software license. Further, new disclosures about implementation costs for both internal-use software and hosting arrangements are required. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We do not expect a material impact to our consolidated financial statements due to the adoption of this guidance.

~~Other amendments to GAAP~~2021 that have been issued by the ~~FASB~~Financial Accounting Standards Board or other standards-setting bodies are not material to our condensed consolidated financial statements. Other amendments to GAAP that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.


3.	~~REVENUE~~

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2. REVENUE

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of ~~transfer of products and services to customers,~~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. Prior period amounts have been reclassified to conform to~~segments, Communications Solutions Group ("CSG") and Electronics Industrial Solutions Group ("EISG").


	Three Months Ended
	July 31,
	2021						2020
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Region
Americas	$	418	$	81	$	499	$	321	$	44	$	365
Europe	122		79		201		94		65		159
Asia Pacific	335		211		546		345		142		487
Total revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011

End Market
Aerospace, Defense & Government	$	280	$	—	$	280	$	202	$	—	$	202
Commercial Communications	595		—		595		558		—		558
Electronic Industrial	—		371		371		—		251		251
Total revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011

Timing of Revenue Recognition
Revenue recognized at a point in time	$	729	$	322	$	1,051	$	624	$	216	$	840
Revenue recognized over time	146		49		195		136		35		171
Total revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011


	Nine Months Ended
	July 31,
	2021						2020
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)
Region
Americas	$	1,228	$	223	$	1,451	$	993	$	149	$	1,142
Europe	380		222		602		301		190		491
Asia Pacific	996		598		1,594		937		431		1,368
Total revenue	$	2,604	$	1,043	$	3,647	$	2,231	$	770	$	3,001

End Market
Aerospace, Defense & Government	$	845	$	—	$	845	$	632	$	—	$	632
Commercial Communications	1,759		—		1,759		1,599		—		1,599
Electronic Industrial	—		1,043		1,043		—		770		770
Total revenue	$	2,604	$	1,043	$	3,647	$	2,231	$	770	$	3,001

Timing of Revenue Recognition
Revenue recognized at a point in time	$	2,172	$	907	$	3,079	$	1,832	$	666	$	2,498
Revenue recognized over time	432		136		568		399		104		503
Total revenue	$	2,604	$	1,043	$	3,647	$	2,231	$	770	$	3,001

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 up front 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

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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 ~~organizational change~~software licenses and software subscriptions, including SaaS, or separately as ~~described in Note 17, "Segment Information."~~part of our customer support programs.

Three Months Ended July 31, 2020 Three Months Ended July 31, 2019
Communications Solutions Group Electronic Industrial Solutions Group Total Communications Solutions Group Electronic Industrial Solutions Group Total
(in millions) (in millions)
Region
Americas $ 321
$ 44
$ 365
$ 375
$ 68
$ 443
Europe 94
65
159
120
62
182
Asia Pacific 345
142
487
297
165
462
Total net revenue $ 760
$ 251
$ 1,011
$ 792
$ 295
$ 1,087

End Market
Aerospace, Defense & Government $ 202
$ 0
$ 202
$ 243
$ 0
$ 243
Commercial Communications 558
0
558
549
0
549
Electronic Industrial 0
251
251
0
295
295
Total net revenue $ 760
$ 251
$ 1,011
$ 792
$ 295
$ 1,087

Timing of Revenue Recognition
Revenue recognized at a point in time $ 624
$ 216
$ 840
$ 687
$ 269
$ 956
Revenue recognized over time 136
35
171
105
26
131
Total net revenue $ 760
$ 251
$ 1,011
$ 792
$ 295
$ 1,087

Nine Months Ended July 31, 2020 Nine Months Ended July 31, 2019
Communications Solutions Group Electronic Industrial Solutions Group Total Communications Solutions Group Electronic Industrial Solutions Group Total
(in millions) (in millions)
Region
Americas $ 993
$ 149
$ 1,142
$ 1,080
$ 191
$ 1,271
Europe 301
190
491
344
196
540
Asia Pacific 937
431
1,368
908
464
1,372
Total net revenue $ 2,231
$ 770
$ 3,001
$ 2,332
$ 851
$ 3,183

End Market
Aerospace, Defense & Government $ 632
$ 0
$ 632
$ 712
$ 0
$ 712
Commercial Communications 1,599
0
1,599
1,620
0
1,620
Electronic Industrial 0
770
770
0
851
851
Total net revenue $ 2,231
$ 770
$ 3,001
$ 2,332
$ 851
$ 3,183

Timing of Revenue Recognition
Revenue recognized at a point in time $ 1,832
$ 666
$ 2,498
$ 2,026
$ 778
$ 2,804
Revenue recognized over time 399
104
503
306
73
379
Total net revenue $ 2,231
$ 770
$ 3,001
$ 2,332
$ 851
$ 3,183

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

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue (contract liabilities) on our condensed consolidated balance sheet. In addition, we defer and capitalize certain costs incurred to obtain a contract (contract costs).

Contract assets -

Contract assets ~~represent~~consist of unbilled ~~amounts from arrangements for which we have performed by transferring goods or services to the customer~~receivables and are recorded when revenue is recognized in advance of ~~receiving all or partial consideration for such goods~~scheduled billings to our customers. These amounts are primarily related to software and ~~services from the customer. Contract assets arise primarily from~~ service ~~agreements and products delivered pending a formal customer acceptance, which generally occurs within 30 days.~~arrangements where transfer of control has occurred but we have not yet invoiced. The contract assets ~~balance was $56~~balances were $61 million ~~and $34 million at~~as of both July 31, ~~2020~~2021 and October 31, ~~2019,~~2020, respectively, and is included in "accounts receivables, net" in our condensed consolidated balance sheet.

Contract costs -

We ~~recognize an asset for the~~capitalize direct and incremental costs ~~of obtaining a contract with a customer.~~incurred to acquire contracts for which the associated revenue is expected to be recognized in future periods. We have determined that certain employee and third-party representative ~~commissions~~commission programs meet the requirements to be capitalized. Employee commissions are based on the achievement of order volume compared to a sales target. Third-party representative commission costs relate directly to a customer contract as the commission is tied to orders contracted through and contracts arranged by our third-party representatives. Without obtaining the contracts, the commissions would not be paid and, as such, are determined to be an incremental cost to obtaining a contract. We only defer these costs when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract.

~~Capitalized incremental~~These costs are ~~allocated to the individual performance obligations in proportion to the transaction price allocated to each performance obligation~~initially deferred and ~~amortized based on the pattern of performance for the underlying performance obligation. Contract costs related to initial contracts and renewals are~~typically amortized over the ~~same~~term of the customer contract which corresponds to the period ~~because the commissions paid on both the initial contract and renewals are commensurate with one another.~~

~~The following table provides a roll-forward~~ of ~~our capitalized~~benefit. Capitalized contract costs were $32 million and $31 million as of July 31, 2021 and October 31, 2020, respectively, and are included in “other current assets” and ~~non-current:~~

Nine Months Ended
July 31, 2020 July 31, 2019
(in millions)
Beginning balance $ 28
$ 0
Costs capitalized on November 1, 2018 due to ASC 606 adoption 0
29
Costs capitalized during the period 49
47
Costs amortized during the period (50 ) (50 )
Ending balance $ 27
$ 26

“other assets” in the condensed consolidated balance sheet. The amortization expense associated with these costs was $20 million and $58 million for the three and nine months ended July 31, 2021, respectively, and $17 million and $50 million for the corresponding periods last year.

Contract liabilities -

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

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

Nine Months Ended
July 31, 2020
(in millions)
Balance at October 31 $ 510
Deferral of revenue billed in current period, net of recognition 322
Deferred revenue arising out of acquisitions 10
Revenue recognized that was deferred as of the beginning of the period (287 )
Foreign currency translation impact 4
Balance at July 31 $ 559


	Nine Months Ended
	July 31,
	2021
	(in millions)
Balance at October 31	$	566
Deferred revenue arising out of acquisitions	2
Deferral of revenue billed in current period, net of recognition	424

Revenue recognized that was deferred as of the beginning of the period	(338)
Foreign currency translation impact	1
Balance at July 31	$	655

Of the ~~$287~~$338 million of revenue recognized in the nine months ended July 31, ~~2020~~2021 that was deferred as of the beginning of the period, approximately ~~$64~~$72 million was recognized in the three months ended July 31, ~~2020.~~2021.

Remaining Performance Obligations

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, was approximately ~~$332~~$365 million as of July 31,

~~2020,~~ 2021, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. Since we typically invoice customers at contract inception, this amount is included in our current and long-term deferred revenue balances. As of July 31, ~~2020,~~2021, we expect to recognize ~~14%~~15 percent of the revenue related to these unsatisfied performance obligations during the remainder of ~~2020, 44%~~2021, 45 percent during ~~2021,~~2022, and ~~42%~~40 percent thereafter.

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3. SHARE-BASED COMPENSATION

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


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
	(in millions)
Cost of products and services	$	3	$	4	$	16	$	13
Research and development	4		4		17		15
Selling, general and administrative	12		11		51		45
Total share-based compensation expense	$	19	$	19	$	84	$	73

Three Months Ended Nine Months Ended

July 31, July 31,
2020 2019 2020 2019
(in millions)
Cost of products and services $ 4
$ 2
$ 13
$ 11
Research and development 4
4
15
13
Selling, general and administrative 11
10
45
42
Total share-based compensation expense $ 19
$ 16
$ 73
$ 66

~~At both~~

4. INCOME TAXES

The following table provides details of income taxes (in millions, except percentages):


	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2021			2020			2021			2020
	(in millions)
Income before taxes	$	270		$	185		$	673		$	495
Provision for income taxes	$	16		$	9		$	61		$	85
Effective tax rate	5.9		%	4.7		%	9.0		%	17.2		%

The tax expense for the three months ended July 31, ~~2020 and 2019, there~~2021 was ~~0 share-based compensation capitalized within inventory.~~

higher compared to the same period last year, primarily due to an increase in income before taxes partially offset by a decrease in tax expense due to discrete tax differences. The ~~total shareholder return (TSR) based performance awards are valued using a Monte Carlo simulation model, which requires~~tax expense for 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 restricted stock awards and the financial metrics-based performance awards 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. We did not grant option awards in the three and nine months ended July 31, ~~2020 and 2019.~~

~~5. INCOME TAXES~~2021 was lower compared to the same period last year primarily due to a decrease in tax expense due to discrete tax differences, partially offset by an increase in income before taxes.

The ~~company’s effective~~income tax ~~rate was 4.7 percent and 17.2 percent~~expense for the three and nine months ended July 31, ~~2020, respectively. The income tax expense was $9~~2021, included a net discrete benefit of $26 million and ~~$85~~$46 million, ~~for the three and nine months ended July 31, 2020,~~ respectively. The income tax expense for the three and nine months ended July 31, 2020, included a net discrete benefit of $10 million and $5 million, respectively.

The ~~company’s effective~~increase in discrete tax ~~rate was 20.1 percent and 16.9 percent~~benefit for the three ~~and nine~~ months ended July 31, ~~2019, respectively.~~2021 was primarily due to release of valuation allowance on Netherlands tax assets due to change in tax law regarding loss carryforwards, a tax benefit resulting from tax rate change in the United Kingdom, and a release of valuation allowance on tax assets for certain U.S. states due to increased profitability. The ~~income~~increase in discrete tax expense was $40 million and $86 million for the three and nine months ended July 31, 2019, respectively. The income tax expense for the three and nine months ended July 31, 2019 included a net discrete benefit of $3 million and $32 million, respectively. The net discrete benefit for the nine months ended July 31, ~~2019 primarily related~~2021 also includes the impact of integration activities for acquired entities resulting in a decrease in U.S. taxes expected to be imposed upon the repatriation of unremitted foreign earnings, an increased benefit of U.S. state R&D credits, and a ~~change~~reduction in ~~tax reserves resulting from a change in judgment.~~U.S. state taxes expected to be imposed on foreign earnings.

Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore and Malaysia, that have granted us tax incentives that require renewal 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 or specific types of income in those jurisdictions. The impact of the tax incentives decreased the income tax provision by ~~$29~~$41 million and ~~$32~~$29 million for the nine months ended July 31, ~~2020~~2021 and ~~2019,~~2020, respectively, resulting in a benefit to net income per share (diluted) of approximately ~~$0.15~~$0.22 and ~~$0.17~~$0.15 for the nine months ended July 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~majority of our~~Singapore tax ~~incentives are~~incentive is due for renewal ~~between~~in 2024, and ~~2025. With regard to~~ the Malaysia incentive is due for renewal in ~~Malaysia, a formal application must be filed during fiscal year 2020 to renew the tax incentive through~~ 2025. ~~Keysight intends to file the application timely and does not anticipate any impediments to the renewal process.~~

The open tax years for the IRS and most U.S. states as of July 31, ~~2020~~2021 are from November 1, ~~2015~~2016 through the current tax year. The Tax Cuts and Jobs Act was enacted in December 2017 and imposed a one-time U.S. tax on foreign earnings not previously repatriated to the U.S., known as the Transition Tax, which was reported in Keysight’s 2018 U.S. federal income tax return. This tax year is currently under examination by the IRS. For the majority of our foreign entities, the open tax years are from November 1, ~~2014~~2015 through the current tax year. For certain foreign entities, the tax years remain open, at most, back to the year 2008. ~~Given~~At this time, management does not believe that the ~~number~~outcome of ~~years and numerous matters~~any ongoing examination will have a material impact on our consolidated financial statements. We believe that ~~remain subject~~an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If resolution of any

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tax issues addressed in our current open examinations are inconsistent with management’s expectations, we may be required to ~~examination~~adjust our tax provision for income taxes in ~~various~~the period such resolution occurs.

Keysight’s 2008 Malaysian income tax ~~jurisdictions, we are unable to estimate~~return was examined by the ~~range of possible changes to the balance of our unrecognized tax benefits.~~

~~The company was audited in Malaysia for the 2008 tax year.~~Malaysian Tax Authority. This tax year pre-dates our separation from Agilent. However, pursuant to the tax matters agreement between Agilent and Keysight that was 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 to the Malaysian Tax Authority of $68 million on gains related to intellectual property rights. Our ~~appeal~~appeals to both the Special Commissioners of Income Tax and the High Court in Malaysia ~~was~~have been unsuccessful. ~~An appeal has now been lodged~~We have filed a Notice of Appeal with the ~~High Court.~~Court of Appeal. The company believes there are numerous defenses to the current assessment; the statute of limitations for the 2008 tax year in Malaysia was closed, and the income in question is exempt from tax in Malaysia. The company is pursuing all avenues to resolve this issue favorably for the company.

In response to the COVID-19 outbreak, various jurisdictions in which the company operates have enacted emergency economic stimulus packages that contain certain income tax provisions. This includes the U.S. federal government enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. Although the company continues to evaluate the impact of such legislation, we have not identified any material impacts on the income tax provision. The company will continue to monitor the impact of these stimulus packages as new clarifying guidance is issued or as additional legislation is enacted.

6.5. NET INCOME PER SHARE

The following ~~is a reconciliation~~table presents the calculation of ~~the numerator and denominator of the~~ basic and diluted net income per share ~~computations for the periods presented below:~~(in millions, except per-share amounts):

Three Months Ended Nine Months Ended
July 31, July 31,
2020 2019 2020 2019
(in millions)
Numerator:

Net income $ 176
$ 159
$ 410
$ 426
Denominator:
Basic weighted-average shares 187
188
187
188
Potential common shares— stock options and other employee stock plans 3
3
3
3
Diluted weighted-average shares 190
191
190
191


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
	(in millions)
Net income	$	254	$	176	$	612	$	410
Basic weighted-average shares	184		187		185		187
Potential common shares— stock options and other employee stock plans	2		3		2		3
Diluted weighted-average shares	186		190		187		190
Net income per share - basic	$	1.38	$	0.94	$	3.31	$	2.19
Net income per share - diluted	$	1.36	$	0.93	$	3.27	$	2.16

The dilutive effect of share-based awards is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense andDiluted shares outstanding include the dilutive effect of in-the-money options and non-vested ~~restricted stock units. Under~~RSUs. 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 ~~amount the employee must pay for exercising stock options and unamortized share-based compensation expense are collectively assumed to be used to repurchase hypothetical shares.~~

~~We exclude stock options with exercise prices greater than the average market price~~inclusion of ~~our common stock~~such awards would have an anti-dilutive impact. Anti-dilutive shares excluded from the calculation of diluted earnings per share because their effect would be anti-dilutive. For both the three and nine months ended July 31, 2020 and 2019, we excluded 0 options from the calculation of diluted earnings per share. In addition, we also exclude from the calculation of diluted earnings per share, stock options, ESPP, LTP Program and restricted stock awards, whose combined exercise price and unamortized fair value collectively were ~~greater than the average market price of our common stock because their effect would also be anti-dilutive. The number of shares excluded was~~ not material for the three and nine months ended July 31, ~~2020. For the three~~2021 and ~~nine months ended July 31, 2019, we excluded approximately 336,000 shares and 253,000 shares, respectively.~~2020.

~~7. SUPPLEMENTAL CASH FLOW INFORMATION~~6. GOODWILL AND OTHER INTANGIBLE ASSETS

Net cash paid for income taxes was $66 million and $78 million for the nine months ended July 31, 2020 and 2019, respectively. Cash paid for interest was $38 million for both the nine months ended July 31, 2020 and 2019.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the amount shown in the condensed consolidated statement of cash flows:

July 31,
2020 October 31,
2019
(in millions)
Cash and cash equivalents $ 1,697
$ 1,598
Restricted cash included in other current assets 4
0
Restricted cash included in other assets 2
2
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 1,703
$ 1,600

Restricted cash included in other current assets primarily relates to short-term deficit reduction contribution to an escrow account for one of our non-U.S. defined benefit pension plans, and restricted cash included in other assets is primarily deposits held as collateral against bank guarantees.

~~8. INVENTORY~~

July 31,
2020 October 31,
2019
(in millions)
Finished goods $ 351
$ 317
Purchased parts and fabricated assemblies 427
388
Total inventory $ 778
$ 705

Inventory-related excess and obsolescence charges recorded in total cost of products were $21 million and $20 million for the nine months ended July 31, 2020 and 2019, respectively. We record excess and obsolete inventory charges for inventory at our sites as well as inventory at our contract manufacturers and suppliers, where we have non-cancellable purchase commitments.


9.	~~GOODWILL AND OTHER INTANGIBLE ASSETS~~

The goodwill ~~balances~~balance as of July 31, ~~2020~~2021 and October 31, ~~2019~~2020 and the activity for the nine months ended July 31, ~~2020~~2021 for each of our reportable operating segments were as ~~follows. Prior period amounts have been reclassified to conform to our organizational change~~follows:


	CSG		EISG		Total
	(in millions)
Goodwill at October 31, 2020	$	984	$	553	$	1,537
Foreign currency translation impact	(7)		8		1
Goodwill arising from acquisitions	72		—		72
Goodwill at July 31, 2021	$	1,049	$	561	$	1,610

Components of goodwill:
Goodwill	$	1,693	$	553	$	2,246
Accumulated impairment losses	(709)		—		(709)
Goodwill at October 31, 2020	$	984	$	553	$	1,537
Goodwill	$	1,758	$	561	$	2,319
Accumulated impairment losses	(709)		—		(709)
Goodwill at July 31, 2021	$	1,049	$	561	$	1,610

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Other intangible assets as ~~described in Note 17, "Segment Information."~~of July 31, 2021 and October 31, 2020 consisted of the following:

Communications Solutions Group Electronic Industrial Solutions Group Total
(in millions)
Balance as of October 31, 2019:
Goodwill $ 1,651
$ 267
$ 1,918
Accumulated impairment losses (709 ) 0
(709 )
Goodwill as reported 942
267
1,209
Goodwill arising from acquisitions 8
280
288
Foreign currency translation impact 6
7
13
Balance as of July 31, 2020 $ 956
$ 554
$ 1,510

Components of goodwill as of July 31, 2020:
Goodwill $ 1,665
$ 554
$ 2,219
Accumulated impairment losses (709 ) 0
(709 )
Goodwill as reported $ 956
$ 554
$ 1,510


	July 31, 2021						October 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Developed technology	$	958	$	854	$	104	$	915	$	749	$	166
Backlog	17		16		1		17		14		3
Trademark/Tradename	36		28		8		35		25		10
Customer relationships	381		220		161		363		183		180
Non-compete agreements	3		1		2		1		1		—
Total amortizable intangible assets	1,395		1,119		276		1,331		972		359
In-Process R&D	7		—		7		2		—		2
Total	$	1,402	$	1,119	$	283	$	1,333	$	972	$	361

During the ~~third quarter of fiscal 2020,~~nine months ended July 31, 2021, we acquired ~~Eggplant Topco Limited~~Sanjole Inc. ("~~Eggplant"~~Sanjole") for ~~$319~~$102 million, net of $11 million cash acquired, and recognized additions to goodwill and other intangible assets of ~~$280~~$49 million and ~~$88~~$51 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. We expect the goodwill recognized on the Sanjole acquisition or any potential impairment charges in the future to be deductible for income tax purposes. The identified intangible assets primarily consist of developed technology of ~~$38~~$24 million, customer relationships of $17 million and ~~customer~~

~~relationships~~in-process R&D of ~~$46 million with~~$7 million. The estimated useful lives of 3developed technology and customer relationships are 7 years and 69 years, respectively. ~~Eggplant~~Sanjole is a ~~software~~leader in wireless test ~~automation platform provider that uses artificial intelligence~~ and ~~analytics~~measurement solutions for protocol decoding and interoperability. Additionally, we used $34 million, net of cash acquired, for other acquisition activity, and recognized goodwill and other intangible assets of $23 million and $16 million, respectively, based on the preliminary allocation of the purchase price to ~~automate test creation~~the estimated fair values of the assets acquired and ~~test execution.~~liabilities assumed. Goodwill for the acquisitions was assigned to the Communications Solutions Group.

Goodwill ~~was~~is assessed for impairment ~~upon the completion of the organizational change~~on a reporting unit basis at least annually in the ~~first~~fourth quarter of ~~fiscal 2020,~~each year, or more frequently when events and ~~it was determined that it was more-likely-than-not~~circumstances occur indicating that the fair value of the reporting unit was greater than its carrying value. We evaluated the impact of the deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and changes in forecasts for each reporting unit, and we determined that norecorded goodwill may be impaired. The company has not identified any triggering events ~~had occurred as~~that indicate an impairment of goodwill for the nine months ended July 31, ~~2020.~~

~~Other intangible assets as of July 31, 2020 and October 31, 2019 consisted of the following:~~

Other Intangible Assets as of July 31, 2020 Other Intangible Assets as of October 31, 2019

Gross
Carrying
Amount

Accumulated
Amortization

Net Book
Value

Gross
Carrying
Amount

Accumulated
Amortization

Net Book
Value
(in millions)
Developed technology $ 916
$ 705
$ 211
$ 876
$ 578
$ 298
Backlog 17
13
4
13
13
0
Trademark/Tradename 34
24
10
34
21
13
Customer relationships 363
171
192
316
139
177
Non-compete agreements 1
1
0
1
1
0
Total amortizable intangible assets 1,331
914

417
1,240
752
488
In-Process R&D 2
—
2
2
—
2
Total $ 1,333
$ 914
$ 419
$ 1,242
$ 752
$ 490
2021.

During the nine months ended July 31, ~~2020, there was $3~~2021, other intangible assets increased $4 million due to the impact of foreign exchange ~~translation impact to~~translation. Amortization of other intangible ~~assets.~~assets was $33 million and $147 million for the three and nine months ended July 31, 2021, respectively. Amortization of other intangible assets was $54 million and $162 million for the three and nine months ended July 31, 2020, respectively. ~~Amortization of other intangible assets was $53 million and $155 million for the three and nine months ended July 31, 2019, respectively.~~

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

Amortization expense
(in millions)
2020 (remainder) $ 58
2021 166
2022 88
2023 65
2024 26
Thereafter $ 14


	Amortization expense
	(in millions)
2021 (remainder)	$	26
2022	$	96
2023	$	74
2024	$	34
2025	$	17
Thereafter	$	29


~~10.~~	~~FAIR VALUE MEASUREMENTS~~

7. 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:

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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 July 31, ~~2020~~2021 and October 31, ~~2019~~2020 were as follows:

Fair Value Measurements at
July 31, 2020 October 31, 2019
Total Level 1 Level 2 Level 3 Other Total Level 1 Level 2 Level 3 Other
(in millions)
Assets:

Short-term

Cash equivalents
Money market funds $ 1,054
$ 1,054
$ 0
$ 0
$ —
$ 932
$ 932
$ 0
$ 0
$ —
Derivative instruments (foreign exchange contracts) 7
0
7
0
—
2
0
2
0
—
Long-term
Equity investments 52
52
0
0
—
37
37
0
0
—
Equity investments - other 9
0
0
0
9
9
0
0
0
9
Total assets measured at fair value $ 1,122
$ 1,106
$ 7
$ 0
$ 9
$ 980
$ 969
$ 2
$ 0
$ 9
Liabilities:

Short-term
Derivative instruments (foreign exchange contracts) $ 9
$ 0
$ 9
$ 0
$ —
$ 6
$ 0
$ 6
$ 0
$ —
Long-term
Deferred compensation liability 17
0
17
0
—
14
0
14
0
—
Derivative instruments (interest rate swaps) 7
0
7
0
—
0
0
0
0
—
Total liabilities measured at fair value $ 33
$ 0
$ 33
$ 0
$ —
$ 20
$ 0
$ 20
$ 0
$ —


	Fair Value Measurements at
	July 31, 2021										October 31, 2020
	Total		Level 1		Level 2		Level 3		Other		Total		Level 1		Level 2		Level 3		Other
	(in millions)
Assets:
Short-term
Cash equivalents
Money market funds	$	1,402	$	1,402	$	—	$	—	$	—	$	1,047	$	1,047	$	—	$	—	$	—
Derivative instruments (foreign exchange contracts)	3		—		3		—		—		3		—		3		—		—
Long-term
Derivative instruments (interest rate swaps)	42		—		42		—		—		23		—		23		—		—
Equity investments	58		58		—		—		—		52		52		—		—		—
Equity investments - other	10		—		—		—		10		9		—		—		—		9
Total assets measured at fair value	$	1,515	$	1,460	$	45	$	—	$	10	$	1,134	$	1,099	$	26	$	—	$	9
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	3	$	—	$	3	$	—	$	—	$	4	$	—	$	4	$	—	$	—
Long-term
Deferred compensation liability	24		—		24		—		—		18		—		18		—		—
Total liabilities measured at fair value	$	27	$	—	$	27	$	—	$	—	$	22	$	—	$	22	$	—	$	—

Net ~~recognized~~unrealized gains ~~(losses)~~ on our equity investments were ~~as follows:~~

Three Months Ended Nine Months Ended
July 31, July 31,
2020 2019 2020 2019
(in millions)
Net realized gains on investments sold $ 0
$ 0
$ 0
$ 1
Net unrealized gains (losses) in investments still held 3
4
13
7
Total $ 3
$ 4
$ 13
$ 8

~~Our money market funds~~$1 million and $3 million for the three months ended July 31, 2021 and 2020, respectively. Net unrealized gains on our equity investments ~~with readily determinable fair values are measured at fair value using quoted market prices~~were $2 million and ~~therefore, are classified within Level 1~~$13 million for the nine months ended July 31, 2021 and 2020, respectively.

Table of the fair value hierarchy. Equity investments without readily determinable fair values that are measured at cost adjusted for observable changes in price or impairments are not categorized in the fair value hierarchy and are presented as "Equity investments - other" 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.Contents

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).8. DERIVATIVES


~~11.~~	~~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 ~~between one~~based on a rolling period of up to twelve months. These derivative instruments are designated and ~~fourteen months. The changes~~qualify as cash flow hedges under the criteria prescribed in the fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss) and reclassified into earnings when the forecasted transaction occurs in the same financial statement line item in the condensed consolidated statement of operations where the earnings effect of the hedged item is presented. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income (loss) will be reclassified into earnings in the current period. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are presented in the same financial statement line of the condensed consolidated statement of operations where the earnings effect of the hedged item is presented. For hedges executed prior to February 1, 2020, these gains and losses are recognized immediately in earnings while for any new hedges, they are amortized on a straight line basis over the tenor of the hedge.authoritative guidance.

~~During the second quarter of~~In fiscal 2020, we entered into forward starting interest rate swaps with an aggregate notional amount of $600 million associated with future interest payments on anticipated debt issuances through fiscal year 2024. The contract ~~term allows~~terms allow us to lock-in a treasury rate on anticipated debt issuances. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance. The changes in fair value of these derivative instruments have been recognized in accumulated other comprehensive income (loss). For the three and nine months ended July 31, 2020, a loss of $3 million and $7 million, respectively, was recognized in accumulated other comprehensive income (loss). Amounts associated with these cash flow hedges will be reclassified to interest expense in the condensed consolidated statement of operations when future interest payments on the anticipated debt occur.

Non-designated Hedges

Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in value of the derivative are recognized in other income (expense), net, in the condensed consolidated statement of operations in the current period, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.

Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions that are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties.

The number of open foreign exchange forward contracts designated as "cash flow hedges" and "not designated as hedging instruments" was ~~193~~207 and ~~62,~~73, respectively, as of July 31, ~~2020.~~2021. The aggregated notional amounts by currency and designation as of July 31, ~~2020~~2021 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	$	19		$	46
British Pound	17			(108)
Singapore Dollar	23			12

Malaysian Ringgit	93			10
Japanese Yen	(101)			(42)
Other currencies	10			(11)
Total	$	61		$	(93)

Derivatives in Cash Flow
Hedging Relationships
Derivatives Not Designated as Hedging Instruments

Forward
Contracts

Forward
Contracts
Currency Buy/(Sell) Buy/(Sell)
(in millions)
Euro $ 17
$ 59
British Pound 0
(75 )
Singapore Dollar 18
11
Malaysian Ringgit 82
9
Japanese Yen (78 ) (68 )
Other currencies (17 ) 9
Total $ 22
$ (55 )

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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 July 31, 2021 and October 31, 2020 were as follows:


Fair Values of Derivative Instruments
Assets Derivatives					Liabilities Derivatives
	Fair Value					Fair Value
Balance Sheet Location	July 31, 2021		October 31, 2020		Balance Sheet Location	July 31, 2021		October 31, 2020
(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts
Other current assets	$	3	$	2	Other accrued liabilities	$	1	$	3
Interest rate swap contracts:
Other assets	42		23

Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current assets	—		1		Other accrued liabilities	2		1
Total derivatives	$	45	$	26		$	3	$	4

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 Nine Months Ended
July 31, July 31,
2020 2019 2020 2019
(in millions)
Derivatives designated as hedging instruments:

Cash Flow Hedges
Interest rate swap contracts:
Loss recognized in accumulated other comprehensive income (loss) $ (3 ) $ 0
$ (7 ) $ 0
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income $ 3
$ (1 ) $ (2 ) $ (3 )
Loss reclassified from accumulated other comprehensive income (loss) into earnings:
Cost of products $ (1 ) $ 0
$ (2 ) $ 0
Selling, general and administrative $ 0
$ 0
$ (1 ) $ (1 )
Gain excluded from effectiveness testing recognized in earnings based on changes in fair value: —

Cost of products $ 0
$ 1
$ 2
$ 2
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense), net $ 1
$ 4
$ 4
$ (1 )


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
	(in millions)
Derivatives designated as hedging instruments:
Cash Flow Hedges
Interest rate swap contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)	$	(29)	$	(3)	$	19	$	(7)
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)	$	—	$	3	$	3	$	(2)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings:
Cost of products	$	1	$	(1)	$	(1)	$	(2)
Selling, general and administrative	$	—	$	—	$	2	$	(1)
Gain excluded from effectiveness testing recognized in earnings based on changes in fair value:			—
Cost of products	$	—	$	—	$	—	$	2

Amount excluded from effectiveness testing recognized in earnings based on amortization approach:

Selling, general and administrative	$	1	$	—	$	1	$	—
Derivatives not designated as hedging instruments:
Gain (loss) recognized in:
Cost of products	$	—	$	—	$	1	$	—
Other income (expense), net	$	(2)	$	1	$	(5)	$	4

The estimated amount at July 31, ~~2020~~2021 expected to be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months is zero.

9. LEASES

We have operating leases for items including office space, order fulfillment, sales and service centers, R&D and certain equipment, primarily automobiles. Most of our leases have remaining terms of up to 13 years, some of which may include

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options to extend the leases, primarily for 3 to 5 years. We consider options to renew in our lease terms and measurement of right-of-use ("ROU") assets and lease liabilities if we determine they are reasonably certain to be exercised.

The weighted average lease term of our operating leases was 8.4 years and 7.4 years as of July 31, 2021 and 2020, respectively. The weighted average discount rate of our operating leases was 3 percent as of July 31, 2021 and 2020.

The following table summarizes the components of our lease cost:


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
	(in millions)				(in millions)
Operating lease cost	$	13	$	13	$	39	$	36
Variable lease cost	$	4	$	4	$	11	$	12

Short-term lease costs, sublease income and finance lease costs were immaterial for the three and nine months ended July 31, 2021 and 2020.

Supplemental cash flow information related to our operating leases was as follows:


	Nine Months Ended
	July 31,
	2021		2020
	(in millions)
Cash payments for operating leases	$	40	$	35
ROU assets obtained in exchange for operating lease obligations	$	78	$	62

Maturity Analysis of Liabilities

The maturities of our operating leases as of July 31, 2021 with initial terms exceeding one year were as follows:


	Operating Leases
	(in millions)
2021 (remainder)	$	13
2022	43
2023	36
2024	29
2025	23
Thereafter	123
Total undiscounted lease liability	267
Imputed interest	30
Total discounted lease liability	$	237

Leases That Have Not Yet Commenced

As of July 31, 2021, we did not have any material leases that had not yet commenced.

Lessor Disclosure

Rental income from leasing out excess facilities for both the three and nine months ended July 31, 2021 and July 31, 2020 was $2 million and $8 million, respectively, and is included in "other operating expense (income), net" in the condensed consolidated statement of operations. Other lessor arrangements were immaterial.

10. DEBT

The following table summarizes the components of our long-term debt:


	July 31, 2021		October 31, 2020
	(in millions)
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of $1 and $2)	$	599	$	598
2027 Senior Notes at 4.60% ($700 face amount less unamortized costs of $4 and $5)	696		695
2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $4 and $4)	496		496
Total debt	$	1,791	$	1,789

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Short-Term Debt

Revolving Credit Facility

On July 30, 2021, we entered into a ~~loss~~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 ~~$1 million.~~LIBOR + 1.125 percent. 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. As of July 31, 2021, we had 0 borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the nine months ended July 31, 2021.

Long-Term Debt

~~12.~~There have been no changes to the principal, maturity, interest rates and interest payment terms of the senior notes during the nine months ended July 31, 2021 as compared to the senior notes described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

As of July 31, 2021 and October 31, 2020, we had $41 million and $40 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 long-term debt, calculated from quoted prices that are primarily Level 1 inputs under the accounting guidance fair value hierarchy, exceeded the carrying value less debt issuance costs by approximately $230 million and $236 million as of July 31, 2021 and October 31, 2020, respectively.

11. RETIREMENT PLANS AND POST-RETIREMENT BENEFIT PLANS

For the three and nine months ended July 31, ~~2020~~2021 and ~~2019,~~2020, our net pension and post-retirement benefit cost (benefit) was comprised of the following:


	Pensions
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				U.S. Post-Retirement Benefit Plan
	Three Months Ended
	July 31,
	2021		2020		2021		2020		2021		2020
	(in millions)
Service cost—benefits earned during the period	$	6	$	5	$	4	$	4	$	1	$	1
Interest cost on benefit obligation	6		6		3		4		1		1
Expected return on plan assets	(13)		(11)		(19)		(20)		(3)		(3)
Amortization:
Net actuarial loss	6		5		10		8		3		3
Prior service credit	—		—		—		—		—		(3)

Net periodic benefit cost (benefit)	$	5	$	5	$	(2)	$	(4)	$	2	$	(1)

Pensions
U.S. Defined Benefit Plans Non-U.S. Defined Benefit
Plans U.S. Post-Retirement
Benefit Plan
Three Months Ended July 31,
2020 2019 2020 2019 2020 2019
(in millions)
Service cost—benefits earned during the period $ 5
$ 5
$ 4
$ 3
$ 1
$ 1
Interest cost on benefit obligation 6
7
4
6
1
2
Expected return on plan assets (11 ) (10 ) (20 ) (19 ) (3 ) (3 )
Amortization:
Net actuarial loss 5
3
8
6
3
3
Prior service credit 0
(1 ) 0
0
(3 ) (4 )
Net periodic benefit cost (benefit) $ 5
$ 4
$ (4 ) $ (4 ) $ (1 ) $ (1 )


	Pensions
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				U.S. Post-Retirement Benefit Plan
	Nine Months Ended
	July 31,
	2021		2020		2021		2020		2021		2020
	(in millions)
Service cost—benefits earned during the period	$	18	$	17	$	11	$	11	$	1	$	1
Interest cost on benefit obligation	17		18		11		12		3		4
Expected return on plan assets	(39)		(33)		(58)		(62)		(9)		(9)
Amortization:
Net actuarial loss	18		14		31		25		8		8
Prior service credit	—		—		—		—		—		(9)
Settlement loss	—		—		16		—		—		—
Net periodic benefit cost (benefit)	$	14	$	16	$	11	$	(14)	$	3	$	(5)

Pensions
U.S. Defined Benefit Plans Non-U.S. Defined Benefit
Plans U.S. Post-Retirement
Benefit Plan
Nine Months Ended July 31,
2020 2019 2020 2019 2020 2019
(in millions)
Service cost—benefits earned during the period $ 17
$ 15
$ 11
$ 10
$ 1
$ 1
Interest cost on benefit obligation 18
21
12
17
4
6
Expected return on plan assets (33 ) (31 ) (62 ) (58 ) (9 ) (9 )
Amortization:
Net actuarial loss 14
8
25
20
8
7
Prior service credit 0
(3 ) 0
0
(9 ) (11 )
Settlement loss 0
0
0
2
0
0
Net periodic benefit cost (benefit) $ 16
$ 10
$ (14 ) $ (9 ) $ (5 ) $ (6 )

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We record the service cost component of net periodic benefit cost (benefit) in the same line item as other employee compensation ~~costs and the~~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 ~~reported~~recorded within ~~other~~"other income (expense), ~~net~~net" in the condensed consolidated statement of operations.

In March 2021, we transferred substantially all the assets and obligations of our Netherlands defined benefit plan ("the Netherlands DB plan”) to an insurance company. The partial settlement resulted in a loss of $16 million, which is included in "other income (expense), net" in the condensed consolidated statement of operations during the nine months ended July 31, 2021. We received a net refund of $3 million due to the partial settlement of the Netherlands DB plan.

We did not contribute to our U.S. ~~Defined Benefit Plans~~defined benefit plans or U.S. ~~Post-Retirement Benefit Plan~~post-retirement benefit plan during the three and nine months ended July 31, 2021 and 2020. We contributed $1 million and $6 million to our non-U.S. defined benefit plans during the three and nine months ended July 31, 2021, respectively. We contributed $2 million and $6 million to our non-U.S. defined benefit plans during the three and nine months ended July 31, 2020, and 2019. We contributed $2 million and $6 million to our Non-U.S. Defined Benefit Plans during the three and nine months ended July 31, 2020, respectively, and we contributed $6 million and $21 million to our Non-U.S. Defined Benefit Plans during the three and nine months ended July 31, 2019, respectively.

For the remainder of ~~2020,~~2021, we ~~are evaluating potential contributions~~do not expect to contribute to our U.S. ~~Defined Benefit Plans, although a contribution is not required,~~defined benefit plan and U.S. post-retirement benefit plan, and we expect to contribute $2 million to our ~~Non-U.S. Defined Benefit Plans.~~non-U.S. defined benefit plans.

On ~~January 1, 2019, we transferred a portion~~

12. SUPPLEMENTAL FINANCIAL INFORMATION

The following tables provide details of ~~the assets~~selected balance sheet items:

Cash, cash equivalents, and ~~liabilities~~restricted cash


	July 31, 2021		October 31, 2020
	(in millions)
Cash and cash equivalents	$	2,153	$	1,756
Restricted cash included in other current assets	—		9
Restricted cash included in other assets	17		2
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	2,170	$	1,767

Restricted cash primarily relates to deficit reduction contributions to an escrow account for one of our ~~Switzerland~~non-U.S. defined benefit ~~plan to an insurance company, resulting in the recognition of a settlement loss of $2 million, which is included in other income (expense), net in the condensed consolidated statement of operations.~~pension plans and deposits held as collateral against bank guarantees.


~~13.~~	~~LEASES~~

We determine whether an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and non-current) on our condensed consolidated balance sheet. Finance leases are included in property, plant and equipment, other accrued liabilities, and other long-term liabilities in our condensed consolidated balance sheet. Our finance lease and lessor arrangements are immaterial.Inventory


	July 31, 2021		October 31, 2020
	(in millions)
Finished goods	$	330	$	342
Purchased parts and fabricated assemblies	440		415
Total inventory	$	770	$	757

ROU assets and lease obligations are recognized based on their present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the lease term and economic environment to discount lease obligations. ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. We initially measure payments based on an index by using the applicable rate at lease commencement. Variable payments that do not depend on an index are not included in the lease liability and are recognized as they are incurred.

We have operating leases for items including office space, order fulfillment, sales and service centers, R&D and certain equipment, primarily automobiles. Our leases have remaining terms of up to 14 years, some of which may include options to extend the leases for 3 to 6 years. We consider options to renew in our lease terms and measurement of ROU assets and lease liabilities if we determine they are reasonably certain to be exercised.

~~As of July 31, 2020, the weighted average lease term of our operating leases was 7.4 years and the weighted average discount rate of our operating leases was 3%.~~

Operating lease cost for the three and nine months ended July 31, 2020 was $13 million and $36 million, respectively, and variable lease cost was $4 million and $12 million, respectively. Short-term lease and finance lease costs were immaterial for both the three and nine months ended July 31, 2020.

~~Supplemental cash flow information related to leases was as follows:~~

Nine Months Ended
July 31, 2020
(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows $ 35
ROU assets obtained in exchange for operating lease obligations $ 62

~~Amounts related to finance lease activities for the nine months ended July 31, 2020 were not material.~~

~~Maturity Analysis of Liabilities~~

Future minimum rents payable as of July 31, 2020 under non-cancellable leases with initial terms exceeding one year reconcile to lease liabilities included in the condensed consolidated balance sheet as follows:

Operating Leases
(in millions)
2020 (remainder) $ 13
2021 47
2022 38
2023 26
2024 17
Thereafter 82
Total undiscounted lease liability 223
Imputed interest 25
Total discounted lease liability $ 198

Prior to the adoption of the new lease accounting standard, future minimum lease payments as of October 31, 2019 as reported in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 under non-cancellable leases with initial terms exceeding twelve months were as follows:

Operating Leases
(in millions)
2020 $ 48
2021 40
2022 31
2023 19
2024 12
Thereafter 46
Total future minimum lease payments $ 196

~~As of July 31, 2020, we did not have material leases that had not yet commenced.~~

~~Lessor Disclosure~~

Rental income from leasing out excess facilities was $2 million and $8 million for the three and nine months ended July 31, 2020, respectively, and is included in other operating expense (income), net. Other lessor arrangements were immaterial.


~~14.~~	~~WARRANTIES, COMMITMENTS AND CONTINGENCIES~~

Standard ~~Warranty~~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.

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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:


	Nine Months Ended
	July 31,
	2021		2020
	(in millions)
Beginning balance	$	33	$	38
Accruals for warranties, including change in estimates	23		17
Settlements made during the period	(21)		(22)
Ending balance	$	35	$	33

Accruals for warranties due within one year	$	21	$	19
Accruals for warranties due after one year	14		14
Ending balance	$	35	$	33

Nine Months Ended
July 31,
2020 2019
(in millions)
Beginning balance $ 38
$ 46
Accruals for warranties including change in estimate 17
21
Settlements made during the period (22 ) (26 )
Ending balance $ 33

$ 41

Accruals for warranties due within one year $ 19
$ 24
Accruals for warranties due after one year 14
17
Ending balance $ 33
$ 41
13. COMMITMENTS AND CONTINGENCIES

Commitments

Our contractual obligations for commitments to contract manufacturers and suppliers increased to $465 million as of July 31, 2021 from $349 million as of October 31, 2020, driven by higher revenue and advance purchase orders to secure capacity for critical parts due to global supply shortages. Our contractual obligations for other purchase commitments increased to $62 million as of July 31, 2021 from $52 million as of October 31, 2020. During the nine months ended July 31, ~~2020,~~2021, there were no other material changes to our contractual commitments as reported in ~~the company’s 2019~~our Annual Report on Form ~~10-K.~~10-K for the fiscal year ended October 31, 2020.

Contingencies

~~15. DEBT~~

~~The following table summarizes~~flows, the ~~components~~outcome of ~~our long-term debt:~~

July 31, 2020 October 31, 2019
(in millions)
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of $2 and $3) $ 598
$ 597
2027 Senior Notes at 4.60% ($700 face amount less unamortized costs of $5 and $5) 695
695
2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $4 and $4) 496
496
Total debt $ 1,789
$ 1,788

~~Short-Term Debt~~

~~Revolving Credit Facility~~

~~We maintain a credit facility (the “Revolving Credit Facility”) that provides for a $450 million, five-year unsecured revolving credit facility that will expire on~~ ~~February 15, 2022. In addition,~~litigation is inherently uncertain and the ~~Revolving Credit Facility permits us~~outcome is difficult to ~~increase the total commitments under this credit facility by up to $150 million~~predict. An adverse outcome in ~~the aggregate on one~~any outstanding lawsuit or ~~more occasions upon request. We~~proceeding could result in significant monetary damages or injunctive relief. If adverse results are above management’s expectations or are unforeseen, management may use amounts borrowed under the facility for general corporate purposes. As of July 31, 2020 and October 31, 2019, we had 0 borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the nine months ended July 31, 2020.

~~Other~~

~~During the three and nine months ended July 31, 2020, we repaid $7 million of debt assumed with the acquisition of Eggplant.~~

~~Long-Term Debt~~

~~There~~not have been no changes to the principal, maturity, interest rates and interest payment terms of the senior notes during the nine months ended July 31, 2020 as compared to the senior notes described in our Annual Report on Form 10-Kaccrued for the ~~fiscal year ended October 31, 2019.~~liability, which could impact our results in a financial period.

As of July 31, 2020 and October 31, 2019, we had $36 million and $37 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 long-term debt, calculated from quoted prices that are primarily Level 1 inputs under the accounting guidance fair value hierarchy, exceeded the carrying value by approximately $270 million and $139 million as of July 31, 2020 and October 31, 2019, respectively. The increase in fair value is due to low U.S. Treasury yields combined with declining corporate credit spreads.

~~16.~~14. STOCKHOLDERS' EQUITY

Stock Repurchase Program

On ~~May 29, 2019, the Board~~November 18, 2020, our board of ~~Directors~~directors approved a new stock repurchase program authorizing the purchase of up to ~~$500~~$750 million of the company’s common stock. ~~Shares~~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 nine months ended July 31, 2021, we repurchased 2,297,600 shares of common stock for $320 million. For the nine months ended July 31, 2020, we repurchased 2,047,166 shares of common stock for $195 million. ~~For the nine months ended July 31, 2019, we repurchased 1,790,420 shares~~

Table of ~~common stock for $130 million.~~Contents

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component and related tax effects for the three and nine months ended July 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


	Foreign currency translation		Net defined benefit pension cost and post retirement plan costs				Unrealized gains (losses) on derivatives		Total
			Actuarial losses		Prior service credits
	(in millions)
As of April 30, 2021	$	7	$	(569)	$	(5)	$	56	$	(511)
Other comprehensive income (loss) before reclassifications	(7)		—		—		(29)		(36)
Amounts reclassified out of accumulated other comprehensive gain (loss)	—		19		—		(1)		18
Tax benefit (expense)	—		(6)		—		7		1
Other comprehensive income (loss)	(7)		13		—		(23)		(17)
As of July 31, 2021	$	—	$	(556)	$	(5)	$	33	$	(528)

As of October 31, 2020	$	(10)	$	(600)	$	(5)	$	16	$	(599)
Other comprehensive income (loss) before reclassifications	10		(14)		—		22		18
Amounts reclassified out of accumulated other comprehensive gain (loss)	—		74		—		(1)		73
Tax benefit (expense)	—		(16)		—		(4)		(20)
Other comprehensive income (loss)	10		44		—		17		71
As of July 31, 2021	$	—	$	(556)	$	(5)	$	33	$	(528)

As of April 30, 2020	$	(50)	$	(508)	$	(1)	$	(8)	$	(567)
Other comprehensive income (loss) before reclassifications	37		—		—		—		37
Amounts reclassified out of accumulated other comprehensive gain (loss)	—		15		(3)		1		13
Tax benefit (expense)	—		(4)		1		—		(3)
Other comprehensive income (loss)	37		11		(2)		1		47
As of July 31, 2020	$	(13)	$	(497)	$	(3)	$	(7)	$	(520)

As of October 31, 2019	$	(43)	$	(536)	$	4	$	(3)	$	(578)
Other comprehensive income (loss) before reclassifications	30		—		—		(9)		21
Amounts reclassified out of accumulated other comprehensive gain (loss)	—		47		(9)		3		41
Tax benefit (expense)	—		(8)		2		2		(4)
Other comprehensive income (loss)	30		39		(7)		(4)		58
As of July 31, 2020	$	(13)	$	(497)	$	(3)	$	(7)	$	(520)

Foreign currency translation Net defined benefit pension cost and post retirement plan costs Unrealized gains (losses) on derivatives Total
Actuarial loss Prior service credit
(in millions)
As of April 30, 2020 $ (50 ) $ (508 ) $ (1 ) $ (8 ) $ (567 )
Other comprehensive income (loss) before reclassifications 37
0
0
0
37
Amounts reclassified out of accumulated other comprehensive loss 0
15
(3 ) 1
13
Tax (expense) benefit 0
(4 ) 1
0
(3 )
Other comprehensive income (loss) 37
11
(2 ) 1
47
As of July 31, 2020 $ (13 ) $ (497 ) $ (3 ) $ (7 ) $ (520 )

As of October 31, 2019 $ (43 ) $ (536 ) $ 4
$ (3 ) $ (578 )
Other comprehensive income (loss) before reclassifications 30
0
0
(9 ) 21
Amounts reclassified out of accumulated other comprehensive loss 0
47
(9 ) 3
41
Tax (expense) benefit 0
(8 ) 2
2
(4 )
Other comprehensive income (loss) 30
39
(7 ) (4 ) 58
As of July 31, 2020 $ (13 ) $ (497 ) $ (3 ) $ (7 ) $ (520 )

As of April 30, 2019 $ (46 ) $ (424 ) $ 12
$ (3 ) $ (461 )
Other comprehensive income (loss) before reclassifications (4 ) 0
0
(1 ) (5 )
Amounts reclassified out of accumulated other comprehensive loss 0
12
(5 ) 0
7
Tax (expense) benefit 0
(3 ) 2
0
(1 )
Other comprehensive income (loss) (4 ) 9
(3 ) (1 ) 1
As of July 31, 2019 $ (50 ) $ (415 ) $ 9
$ (4 ) $ (460 )

As of October 31, 2018 $ (60 ) $ (445 ) $ 19
$ (2 ) $ (488 )
Other comprehensive income (loss) before reclassifications 10
2
0
(3 ) 9
Amounts reclassified out of accumulated other comprehensive loss 0
38
(14 ) 1
25
Tax (expense) benefit 0
(10 ) 4
0
(6 )
Other comprehensive income (loss) 10
30
(10 ) (2 ) 28
As of July 31, 2019 $ (50 ) $ (415 ) $ 9
$ (4 ) $ (460 )

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Reclassifications out of accumulated other comprehensive loss for the three and nine months ended July 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


Details about Accumulated Other Comprehensive Loss Components													Affected Line Item in Statement of Operations
Details about accumulated other comprehensive loss components														Details about accumulated other comprehensive loss components	Amounts reclassified from other comprehensive loss							Affected line item in statement of operations
	Three Months Ended						Nine Months Ended								Three Months Ended			Nine Months Ended
	July 31,						July 31,								July 31,			July 31,
	2020			2019			2020			2019						2021		2020		2021		2020
	(in millions)						(in millions)									(in millions)				(in millions)
Unrealized gain (loss) on derivatives	$	(1	)	$	0		$	(2	)	$	0		Cost of products	Unrealized gain (loss) on derivatives		$	1	$	(1)	$	(1)	$	(2)	Cost of products
	0			0			(1		)	(1		)	Selling, general and administrative			—		—		2		(1)		Selling, general and administrative
	0			0			0			0			Provision for income taxes			—		—		—		—		Benefit (provision) for income tax
	(1		)	0			(3		)	(1		)	Net of income tax			1		(1)		1		(3)		Net of Income tax

Net defined benefit pension cost and post retirement plan costs:														Net defined benefit pension cost and post retirement plan costs:
Actuarial net loss	(15		)	(12		)	(47		)	(38		)
Prior service credit	3			5			9			14
Net actuarial loss														Net actuarial loss		(19)		(15)		(74)		(47)
Prior service credits														Prior service credits		—		3		—		9
	(12		)	(7		)	(38		)	(24		)	Total before income tax			(19)		(12)		(74)		(38)		Total before income tax
	3			1			6			5			Provision (benefit) for income taxes			5		3		19		6		Benefit (provision) for income tax
	(9		)	(6		)	(32		)	(19		)	Net of income tax			(14)		(9)		(55)		(32)		Net of income tax

Total reclassifications for the period	$	(10	)	$	(6	)	$	(35	)	$	(20	)		Total reclassifications for the period		$	(13)	$	(10)	$	(54)	$	(35)

An amount in parentheses indicates a reduction to income and an increase to the accumulated other comprehensive loss.

Reclassifications of prior service benefit and actuarial net loss in respect of retirement plans and post retirement pension plans are included in the computation of net periodic cost (see Note ~~12,~~11, "Retirement Plans and Post-Retirement Benefit Plans").


~~17.~~	15. SEGMENT INFORMATION

We are a technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.

Our operating segments were determined based primarily on how the chief operating decision maker views and evaluates our operations. Segment operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to each segment and to assess performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and services and manufacturing are considered in determining the formation of these operating segments.

We ~~completed an organizational change~~report our results in ~~the first quarter of fiscal 2020 to manage our Ixia Solutions Group within our~~2 reportable segments: Communications Solutions Group to enable us to create improved go-to market and product development alignment as well as accelerate solution synergies as new technologies emerge. Prior period segment results were revised to conform to the presentation. As a result, we now have 2 reportable operating segments, Communications Solutions Group (“CSG”("CSG") and Electronic Industrial Solutions Group ~~(“EISG”~~("EISG").

T~~he 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.

A significant portion of the segments' expenses arise from shared services and infrastructure that we have historically provided to the segments in order to realize economies of scale and to efficiently use resources. These expenses, collectively called corporate charges, include legal, accounting, real estate, insurance services, information technology services, treasury and other corporate infrastructure expenses. Charges are allocated to the segments, and the allocations have been determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the segments.

~~The following tables reflect the~~ results of our reportable segments ~~under~~are based on our management reporting ~~system. These results~~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. ~~Prior period amounts have been revised to conform to the new organizational structure.~~

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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 and~~a gain on an insurance settlement related ~~costs,~~to northern California ~~wildfire-related impacts,~~wildfires, restructuring costs, interest income, interest expense and other items as noted in the reconciliations below.

Communications Solutions Group Electronic Industrial Solutions Group Total Segments
(in millions)
Three months ended July 31, 2020:
Total net and segment revenue $ 760
$ 251
$ 1,011
Segment income from operations $ 197
$ 67
$ 264

Three months ended July 31, 2019:
Total net revenue $ 792
$ 295
$ 1,087
Amortization of acquisition-related balances 1
0
1
Total segment revenue $ 793
$ 295
$ 1,088
Segment income from operations $ 192
$ 83
$ 275


	Three Months Ended
	July 31,
	2021						2020
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)

Revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011
Segment income from operations	$	224	$	115	$	339	$	197	$	67	$	264

Communications Solutions Group Electronic Industrial Solutions Group Total Segments
(in millions)
Nine months ended July 31, 2020:
Total net and segment revenue $ 2,231
$ 770
$ 3,001
Segment income from operations $ 512
$ 199
$ 711

Nine months ended July 31, 2019:
Total net revenue $ 2,332
$ 851
$ 3,183
Amortization of acquisition-related balances 7
0
7
Total segment revenue $ 2,339
$ 851
$ 3,190
Segment income from operations $ 532
$ 215
$ 747


	Nine Months Ended
	July 31,
	2021						2020
	CSG		EISG		Total		CSG		EISG		Total
	(in millions)

Revenue	$	2,604	$	1,043	$	3,647	$	2,231	$	770	$	3,001
Segment income from operations	$	670	$	309	$	979	$	512	$	199	$	711

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

Three Months Ended Nine Months Ended
July 31, July 31,
2020 2019 2020 2019
(in millions)
Total reportable operating segments' income from operations $ 264
$ 275
$ 711
$ 747
Share-based compensation expense (19 ) (16 ) (73 ) (66 )
Amortization of acquisition-related balances (54 ) (56 ) (167 ) (164 )
Acquisition and integration costs (8 ) (3 ) (12 ) (5 )
Northern California wildfire-related impacts 0
0
32
0
Restructuring and other (1 ) (3 ) (4 ) (9 )
Income from operations, as reported 182
197
487
503
Interest income 1
7
11
17
Interest expense (20 ) (20 ) (59 ) (60 )
Other income (expense), net 22
15
56
52
Income before taxes, as reported $ 185
$ 199
$ 495
$ 512


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
	(in millions)
Total reportable operating segments' income from operations	$	339	$	264	$	979	$	711
Share-based compensation	(19)		(19)		(84)		(73)
Amortization of acquisition-related balances	(33)		(54)		(147)		(167)
Acquisition and integration costs	(2)		(8)		(8)		(12)
Gain on insurance settlement	—		—		—		32
Restructuring and other	(1)		(1)		(9)		(4)
Income from operations, as reported	284		182		731		487
Interest income	1		1		2		11
Interest expense	(20)		(20)		(59)		(59)
Other income (expense), net	5		22		(1)		56
Income before taxes, as reported	$	270	$	185	$	673	$	495

~~The following table presents assets directly managed by each segment. Unallocated assets primarily consist of cash and cash equivalents, investments and other assets.~~

Communications Solutions Group Electronic Industrial Solutions Group Total Segments
(in millions)
Assets:

As of July 31, 2020 $ 3,873
$ 1,353
$ 5,226
As of October 31, 2019 $ 3,671
$ 928
$ 4,599

~~The increase in segment assets as~~Item 2. Management's Discussion and Analysis of ~~July 31, 2020 as compared to October 31, 2019 is primarily due to the acquisition~~Financial Condition and Results of ~~Eggplant and the addition of operating lease right-of-use assets as a result of adoption of~~ Operations (Unaudited)~~ASU 2016-02, Leases,~~ ~~on November 1, 2019.~~


~~18.~~	~~IMPACT OF THE 2017 NORTHERN CALIFORNIA WILDFIRES~~

In the first quarter of 2020, we received $37 million of insurance proceeds primarily related to replacement of capital and recovery of fire-related expenses, which resulted in an other operating gain of $32 million. No additional insurance proceeds or material expenses related to the 2017 northern California wildfires are expected.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)~~

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. This report contains forward-looking statements including, without limitation, statements regarding trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, our future effective tax rate and tax valuation allowance, 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, increased trade tension and tightening of export control regulations, impact of pandemic conditions, such as the novel coronavirus ("COVID-19"), ~~including disruption of~~impacts to the supply chain, ~~causing delays in our ability to manufacture or deliver products and solutions to customers,~~ the impact of ~~social distancing requirements, slowdown in customer purchasing, order cancellations, a second wave of infection resulting in additional government mandated shutdowns, labor shortages,~~volatile weather caused by environmental conditions such as climate change, and our and the combined group's estimated or anticipated future results of operations, ~~which~~that involve risks and uncertainties. Our actual

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results could differ materially from the results contemplated by these forward-looking statements due to

various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Basis of Presentation

The financial information presented in this Form 10-Q is not audited and is not necessarily indicative of our future consolidated financial position, results of operations ~~comprehensive income~~ or cash flows. 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 quarter periods.

Overview and Executive Summary

Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.

We invest in research and development ("R&D") to align our business with available markets and position the company for growth. Our R&D efforts focus on improvements to existing software and hardware products and development to support new software and hardware product introductions and complete customer solutions aligned to the industries we serve. 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, customer solutions, products and services. We remain committed to investment in ~~research and development~~R&D and have focused our development efforts on strategic opportunities to capture future growth.

~~We completed an organizational change~~COVID-19 pandemic

Our global operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the ~~first quarter of fiscal 2020~~U.S. and international markets. During the nine months ended July 31, 2021, governments in many countries, including the United States, continued to manage our Ixia Solutions Group within our Communications Solutions Group to enable us to create improved go-to market and product development alignment as well as accelerate solution synergies as new technologies emerge. Prior period segment results were revised to conform to the presentation. As a result, we now have two reportable operating segments, Communications Solutions Group (“CSG”) and Electronic Industrial Solutions Group (“EISG”).

~~Impact of COVID-19 pandemic and outlook~~

~~In March 2020, the World Health Organization declared COVID-19 as a global pandemic. In response to the rapid global spread of the virus, national, state, and local governments issued~~issue orders and recommendations to attempt to reduce the further spread of the disease. Such orders included movement control and shelter-in-place orders, travel restrictions, limitations on public gatherings, school closures, social distancing requirements and the closure of all but critical and essential services and infrastructure. In response to these measures and to protect the health and safety of our employees, we temporarily closed our locations globally, including our production and order fulfillment facilities, and asked all employees who can work from home to do so for the foreseeable future, made substantial changes to employee travel policies, and canceled training and marketing events or moved them to a virtual format. Our customers, suppliers and vendors are all subject to these restrictions and orders and are similarly impacted.

Working with local governments and health officials to implement health and safety measures at all of our locations, we have re-opened ~~many~~most sites worldwide and significantly ramped our production and services ~~operations, despite the ongoing broader industry supply chain challenges. We have restarted on-site operations using only employees who are not able~~operations.

For discussion of risks related to ~~work effectively from home and where doing so is in compliance with local regulations and our~~ COVID-19 ~~safety procedures. We continue to make significant investment in R&D and have taken necessary steps to sustain employee productivity and deliver~~ on our ~~customer commitments, particularly those who provide essential services,~~operations, business results and ~~support~~financial condition, see “Item 1A. Risk Factors.”

Three and nine months ended July 31, 2021 and 2020

We realized the ~~communities in which we operate around the world. Also, given the uncertainty~~most notable impacts of the ~~duration or severity~~COVID-19 virus control measures in the last half of the ~~pandemic, we have taken proactive measures to reduce costs~~second quarter and ~~preserve liquidity, while supporting our customers and advancing key projects. These measures include a temporary hiring freeze and a reduction in other discretionary spending, along~~continuing into the third quarter of fiscal 2020, with ~~lower variable compensation and a reduction in outsourced manufacturing costs enabled by our flexible cost structure.~~

~~Our revenue for~~sequential improvement each quarter thereafter. During the three and nine months ended July, 31, 2020, ~~was lower when compared to the same periods last year due to the~~our orders, revenues and margins were adversely impacted by site closures and supply chain disruptions resulting from the global disruptions and shutdown of our production facilities, resulting in a soft prior-period compare.

Total orders for the three and nine months ended July 31, 2021 were $1,310 million and $3,865 million, respectively, an increase of 23 percent and 17 percent compared to the same periods last ~~half of the second quarter continuing into the third quarter. The~~year. Orders associated with acquisitions had a favorable impact of 1 percent on the year-over-year order growth for both the three and nine months ended July 31, 2021. Foreign currency movements had a favorable impact of 1 percent on year-over-year order growth for both the three and nine months ended July 31, 2021. For both the three and nine months ended July 31, 2021, orders grew across all regions.

Revenue for the three and nine months ended July 31, 2021 was $1,246 million and $3,647 million, respectively, an increase of 23 percent and 22 percent compared to the same periods last year. Revenue associated with acquisitions had a favorable impact of 1 percent on the year-over-year revenue growth for both the three and nine months ended July 31, 2021. Foreign currency movements had a favorable impact of 1 percent and 2 percent on the year-over-year revenue growth for the three and nine months ended July 31, 2021, respectively. For the three and nine months ended July 31, 2021, revenue for both the Communications Solutions Group and Electronic Industrial Solutions Group increased year-over-year driven by strength in all markets. Revenue from the Communications Solutions Group and Electronic Industrial Solutions Group represented 70 percent and 30 percent, respectively, of total revenue for the three months ended July 31, 2021. Revenue from the Communications Solutions Group and Electronic Industrial Solutions Group represented 71 percent and 29 percent, respectively, of total revenue for the nine months ended July 31, 2021.

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Net income for the three and nine months ended July 31, 2021 was $254 million and $612 million, respectively, compared to $176 million and $410 million for the same periods last year. The increase in net income for the three months ended July 31, 2021 was primarily driven by higher revenue volume and lower ~~revenue on gross margin and operating margin was~~amortization of acquisition-related balances, partially offset by ~~favorable mix~~an increase in variable people-related and infrastructure-related costs, higher R&D investments and incremental costs of acquired businesses. The increase in net income for the nine months ended July 31, 2021 was primarily driven by higher revenue volume, lower amortization of acquisition-related balances and lower ~~discretionary spending as~~income tax expense, partially offset by an increase in variable people-related costs, higher R&D investment, lower operating income due to a ~~result~~one-time prior-period gain related to an insurance settlement, a loss on a partial settlement of our ~~mitigating measures. We continue to see steady demand across several end markets, with on-going investment~~Netherlands defined benefit plan, incremental costs of acquired businesses and the changes in ~~next-generation technologies, such as 5G, 400G, and advanced semiconductor node processes, while demand decreased in other markets, such as automotive and general electronics, including education.~~fair value of our equity investments.

Outlook

Our strategy of bringing first-to-market solutions that help customers develop new technologies and accelerate innovation provides a platform for long-term growth. We expect our customers to continue to make R&D investments in certain next-generation technologies. We are still in the early market stages for ~~emerging~~ technologies, such as ~~5G,~~5G/6G, next-generation automotive, internet of things ("IoT") and defense modernization and expect technology investments to continue. We continue to closely monitor the current macro environment related to trade, tariffs, monetary and fiscal policies, ~~as well as~~ pandemics or epidemics, such as the COVID-19 outbreak, as well as the recent ~~coronavirus outbreak.~~global semiconductor chip shortage. We have complied and will continue to comply with recent U.S. Department of Commerce export control regulations. While we expect ongoing COVID-19 demand and supply chain headwinds over the next few quarters, we remain confident in our long-term secular market growth trends and the strength of our operating model.

~~For discussion of risks related to COVID-19 on our operations, business results and financial condition, see “Item 1A. Risk Factors.”~~

~~Three and nine months ended July 31, 2020 and 2019~~

Total orders for the three and nine months ended July 31, 2020 were $1,067 million and $3,297 million, respectively, a decrease of 4 percent and an increase of 2 percent, respectively, when compared to the same periods last year and a decrease of 4 percent and an increase of 1 percent, respectively, excluding the impact of acquisitions. Foreign currency movements had an immaterial impact on the order growth for both the three and nine months ended July 31, 2020. For the three months ended July 31, 2020, orders declined across all regions, most significantly in Europe. For the nine months ended July 31, 2020, order growth in Asia and the Americas was partially offset by a decline in Europe.

Net revenue for the three and nine months ended July 31, 2020 was $1,011 million and $3,001 million, respectively, a decrease of 7 percent and 6 percent, respectively, when compared to the same periods last year. Foreign currency movements and acquisitions had an immaterial impact on revenue growth for the three and nine months ended July 31, 2020. For the three and nine months ended July 31, 2020, revenue for both the Communications Solutions Group and Electronic Industrial Solutions Group declined year over year due to the impact of site closures and supply chain disruptions related to the COVID-19 pandemic impacting the last half of the second quarter and continuing into the third quarter. Revenue from the Communications Solutions Group and Electronic Industrial Solutions Group represented 75 percent and 25 percent, respectively, of total revenue for the three months ended July 31, 2020. Revenue from the Communications Solutions Group and Electronic Industrial Solutions Group represented 74 percent and 26 percent, respectively, of total revenue for the nine months ended July 31, 2020.

Net income for the three and nine months ended July 31, 2020 was $176 million and $410 million, respectively, compared to $159 million and $426 million, respectively, for the same periods last year. The increase in net income for the three months ended July 31, 2020 was primarily driven by lower income tax provision, favorable mix, a decline in variable people-related costs and a reduction in discretionary spending, partially offset by lower revenue volume due to the impact of site closures and supply chain disruptions. The decrease in net income for the nine months ended July 31, 2020 was primarily driven by lower revenue volume due to the impact of site closures and supply chain disruptions in the last half of the second quarter and continuing into the third quarter, partially offset by favorable mix and an operating gain due to insurance proceeds received for property, plant and equipment damaged in the 2017 northern California wildfires and lower variable people-related costs.

In the first quarter of 2020, we received $37 million of insurance proceeds primarily related to replacement of capital and recovery of expenses related to the 2017 northern California wildfires. These proceeds resulted in an operating gain of $32 million. No additional insurance proceeds or material expenses related to the 2017 northern California wildfires are expected.

Critical Accounting Policies and Estimates

There were no material changes during the three and nine months ended July 31, ~~2020~~2021 to the critical accounting estimates described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2019. Changes~~2020.

Adoption of New Accounting Pronouncements

Accounting standard updates during the three and nine months ended July 31, 2021 that have been issued by the Financial Accounting Standards Board or other standards-setting bodies are not material to our ~~accounting policy for leases as a result of adopting Accounting Standard Update 2016-02,~~ ~~Leases, are discussed in Note 2, "New Accounting Pronouncements," and Note 13, "Leases," to the~~ condensed consolidated financial statements.

~~Adoption of New Pronouncements~~

~~See Note 2, “New Accounting Pronouncements,” to the condensed consolidated financial statements for a description of new accounting pronouncements.~~

~~Foreign~~ Currency Exchange Rate Exposure

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

Results from Operations - Three and nine months ended July 31, 2021 and 2020

~~Net~~ 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. ~~Cancellations~~Returns are recorded in the period received from the customer and historically have not been material.


	Three Months Ended				Nine Months Ended				Year over Year Change
	July 31,				July 31,				Three	Nine
	2021		2020		2021		2020		Months	Months
					(in millions)
Revenue:
Products	$	1,021	$	813	$	2,987	$	2,423	26%	23%
Services and other	225		198		660		578		14%	14%
Total revenue	$	1,246	$	1,011	$	3,647	$	3,001	23%	22%

Three Months Ended
Nine Months Ended Year over Year Change
July 31,
July 31, Three Nine
2020 2019
2020 2019 Months Months
(in millions)
Net revenue:
Products $ 813
$ 904
$ 2,423
$ 2,652
(10)% (9)%
Services and other 198
183
578
531
8% 9%
Total net revenue $ 1,011
$ 1,087

$ 3,001
$ 3,183
(7)% (6)%

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The following table provides the percent change in ~~net~~ revenue for the three and nine months ended July 31, ~~2020~~2021 by geographic region including and excluding the impact of foreign currency movements as compared to the same periods last year.


	Year over Year Change									Year over Year Change
	Three Months Ended				Nine Months Ended					Three Months Ended		Nine Months Ended
	July 31, 2020				July 31, 2020					July 31, 2021		July 31, 2021
Geographic Region	Actual		Currency Adjusted		Actual		Currency Adjusted		Geographic Region	Actual	Currency Adjusted	Actual	Currency Adjusted
Americas	(17	)%	(17	)%	(10	)%	(10	)%	Americas	37%	37%	27%	27%
Europe	(13	)%	(12	)%	(9	)%	(9	)%	Europe	27%	21%	23%	18%
Asia Pacific	6	%	6	%	—		—		Asia Pacific	12%	11%	17%	15%
Total net revenue	(7	)%	(7	)%	(6	)%	(6	)%
Total revenue									Total revenue	23%	22%	22%	20%

For the three ~~months ended July 31, 2020, revenue declined in the Americas~~ and ~~Europe, partially offset by growth in Asia Pacific, due to the impact of site closures and supply chain disruptions related to the COVID-19 pandemic. For the~~ nine months ended July 31, ~~2020,~~2021, revenue declined in the Americas and Europe, while Asia Pacific remained flat, due to the impact of site closures and supply chain disruptions related to the COVID-19 pandemic in the last half of the second quarter and continuing into the third quarter. Foreigngrew across all regions. On a geographical basis, foreign currency movements had ~~an immaterial~~a favorable impact of 6 percentage points and 5 percentage points, respectively on ~~the~~ revenue ~~decline~~in Europe for the three and nine months ended July 31, ~~2020. Currency had an unfavorable~~2021 and a favorable impact of 1 percentage point and 2 percentage points, respectively, on revenue in ~~Europe for the three months ended July 31, 2020.~~

~~Costs and Expenses~~

Three Months Ended Nine Months Ended
Year over Year Change
July 31, July 31,
Three Nine
2020 2019 2020 2019
Months Months
Total gross margin 59.9 % 59.1 % 59.2% 58.7 % 1 ppt 1 ppt
Operating margin 18.0 % 18.2 % 16.2% 15.8 % — —

in millions
Research and development $ 169
$ 168
$ 522
$ 512
1% 2%
Selling, general and administrative $ 259
$ 281
$ 810
$ 869
(8)% (7)%
Other operating expense (income), net $ (4 ) $ (3 ) $ (42 ) $ (15 ) 29% 169%

~~Gross margin increased 1 percentage point each~~Asia Pacific for the three and nine months ended July 31, ~~2020~~2021.

Costs and Expenses


	Three Months Ended						Nine Months Ended						Year over Year Change
	July 31,						July 31,						Three	Nine
	2021			2020			2021			2020			Months	Months
Total gross margin	63.2		%	59.9		%	61.2		%	59.2		%	3 ppts	2 ppts
Operating margin	22.7		%	18.0		%	20.0		%	16.2		%	5 ppts	4 ppts

in millions
Research and development	$	207		$	169		$	615		$	522		23%	18%
Selling, general and administrative	$	302		$	259		$	900		$	810		17%	11%
Other operating expense (income), net	$	(5)		$	(4)		$	(14)		$	(42)		11%	(66)%

Gross margin for the three months ended July 31, 2021 increased 3 percentage points compared to the same period last year, primarily driven by ~~favorable mix~~lower amortization of acquisition-related balances, higher revenue volume and lower ~~variable people-related~~warranty costs, partially offset by ~~lower~~higher variable people-related costs. Gross margin for the nine months ended July 31, 2021 increased 2 percentage points compared to the same period last year, primarily driven by higher revenue volume ~~due to the impact~~and lower amortization of ~~site closures and supply chain disruptions.~~acquisition-related balances, partially offset by higher variable people-related costs.

~~Research and development~~R&D expense ~~increased 1 percent and 2 percent~~ for the three and nine months ended July 31, 2020, respectively, compared to the same periods last year, driven by greater investment in key growth opportunities in our end markets, leading-edge technologies and incremental costs of an acquired business, partially offset by declines in variable people-related costs and a reduction in discretionary spending due to COVID-19 related restrictions. As a percentage of revenue, research and development expense was 17 percent each for the three and nine months ended July 31, 2020, respectively, as compared to 152021 increased 23 percent and 1618 percent, ~~for the three and nine months ended July 31, 2019, respectively.~~

~~Selling, general and administrative expense decreased 8 percent and 7 percent for the three and nine months ended July 31, 2020,~~ respectively, ~~when~~ compared to the same periods last year, primarily driven by ~~declines~~greater investments in key growth opportunities in our end markets and leading-edge technologies, increases in variable people-related and ~~other~~incremental costs of acquired businesses. As a percentage of revenue, R&D expense was 17 percent for both the three and nine months ended July 31, 2021 and 2020, respectively.

Selling, general and administrative expense for the three months ended July 31, 2021 increased 17 percent compared to the same period last year, primarily driven by increases in variable people-related costs and infrastructure-related costs and incremental costs of acquired businesses. Selling, general and administrative expense for the nine months ended July 31, 2021 increased 11 percent compared to the same period last year, primarily driven by increases in variable people-related costs and infrastructure-related costs and incremental costs of acquired businesses, partially offset by reductions in travel and marketing-related costs due to COVID-19 related ~~restrictions, partially offset by an increase in acquisition- and integration-related costs.~~restrictions.

Other operating expense (income), net for the three and nine months ended July 31, 2021 was income of $5 million and $14 million, respectively, compared to income of $4 million and $42 million for the ~~three and nine months ended July 31, 2020, respectively, compared to income of $3 million and $15 million for the three and nine months ended July 31, 2019, respectively.~~same periods last year. Other operating expense (income), net for the nine months ended July 31, 2020 ~~includes~~included a one-time gain of $32 million ~~due to~~on an insurance ~~proceeds received for property, plant and equipment damaged in the 2017 northern California wildfires.~~settlement.

Operating margin for the three months ended July 31, ~~2020 was flat when~~2021 increased 5 percentage points compared to the same period last year, primarily driven by gross margin gains and lower operating expenses as ~~impact from lower revenue volume was offset by favorable revenue mix, declines in variable people-related costs, travel costs and marketing-related costs due to COVID-19 related restrictions.~~a percentage of sales. Operating margin for the nine months ended July 31, ~~2020 was flat when~~2021 increased 4 percentage points compared to the same period last year, primarily driven by gross margin gains and lower operating expenses as a percentage of sales, partially offset by lower operating income due to a one-time prior-period gain ~~from insurance proceeds~~ related to ~~the 2017 northern California wildfires and declines in variable people-related costs and travel costs and marketing-related costs, offset by lower revenue volume.~~an insurance settlement.

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As of July 31, ~~2020,~~2021, our headcount was approximately ~~13,800~~14,100 compared to approximately ~~13,300~~13,800 at July 31, ~~2019. The increase in headcount was primarily driven by investments in our sales force, acquisitions and services.~~2020.

Interest Income and Expense

Interest income for the three and nine months ended July 31, ~~2020~~2021 was $1 million and ~~$11~~$2 million, respectively, as compared to $7$1 million and ~~$17~~$11 million, respectively, for the comparable periods last year and primarily relates to interest earned on our cash balances. Interest expense for the three and nine months ended July 31, 2021 and 2020 was $20 million and $59 million, respectively, ~~as compared to $20 million and $60 million, respectively, for the comparable periods last year~~ and primarily relates to interest on our senior notes.

Other income (expense), net

Other income (expense), net for the three and nine months ended July 31, ~~2020~~2021 was income of $5 million and expense of $1 million, respectively, compared to income of $22 million and $56 ~~million, respectively, compared to income of $15 million and $52~~ million, respectively, for the same periods last year and primarily includes net income related to our defined benefit and post-retirement benefit plans, ~~(interest cost, expected return on assets and amortization of net actuarial loss and prior service credits),~~ the change in fair value of our equity investments and a gain from insurance proceeds.

~~Income Taxes~~

~~The company’s effective tax rate was 4.7 percent and 17.2 percent~~ Other income (expense), net for the nine months ended July 31, 2021 includes a $16 million loss on partial settlement of our Netherlands defined benefit plan. Other income (expense), net for the three and nine months ended July 31, 2020 ~~respectively.~~ includes a one-time gain from insurance proceeds.

Income Taxes

The following table provides details of income taxes (in millions, except percentages):


	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2021			2020			2021			2020
	(in millions)
Income before taxes	$	270		$	185		$	673		$	495
Provision for income taxes	$	16		$	9		$	61		$	85
Effective tax rate	5.9		%	4.7		%	9.0		%	17.2		%

The tax expense for the three months ended July 31, 2021 was higher compared to the same period last year, primarily due to an increase in income before taxes partially offset by a decrease in tax expense due to discrete tax differences. The tax expense for the nine months ended July 31, 2021 was lower compared to the same period last year primarily due to a decrease in tax expense due to discrete tax differences, partially offset by an increase in income before taxes.

The income tax expense ~~was $9 million and $85 million~~ for the three and nine months ended July 31, ~~2020~~2021, included a net discrete benefit of $26 million and $46 million, respectively.

The income tax expense for the three and nine months ended July 31, 2020, included a net discrete benefit of $10 million and $5 million, respectively.

Keysight’s 2008 Malaysian income tax ~~jurisdictions, we are unable to estimate~~return was examined by the ~~range of possible changes to the balance of our unrecognized tax benefits.~~

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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 to the Malaysian Tax Authority of $68 million on gains related to intellectual property rights. Our ~~appeal~~appeals to both the Special Commissioners of Income Tax and the High Court in Malaysia ~~was~~have been unsuccessful. ~~An appeal has now been lodged~~We have filed a Notice of Appeal with the ~~High Court.~~Court of Appeal. The company believes there are numerous defenses to the current assessment; the statute of limitations for the 2008 tax year in Malaysia was closed, and the income in question is exempt from tax in Malaysia. The company is pursuing all avenues to resolve this issue favorably for the company.

At July 31, 2020, our estimated annual effective tax rate for fiscal 2020 is an expense of 18.1 percent excluding discrete items. We determine our interim tax provision using an estimated annual effective tax rate methodology except in jurisdictions where we anticipate a full year loss or we have a year-to-date ordinary loss for which no tax benefit can be recognized. In these jurisdictions, tax expense is computed separately. Our estimated annual effective tax rate was lower than the U.S. statutory rate primarily due to the beneficial impact of the mix of earnings in non-U.S. jurisdictions taxed at lower rates and the U.S. federal research and development tax credit, offset by the expense impact of the U.S. GILTI tax on earnings in non-U.S. jurisdictions net of U.S. foreign tax credits and other U.S. tax reform deductions and reserves for uncertain tax positions.

We do not recognize deferred taxes for temporary differences expected to impact the GILTI tax expense in future years. We recognize the tax expense related to GILTI in each year in which the tax is incurred.

Segment Overview

We completed an organizational change in the first quarter of fiscal 2020 to manage our Ixia Solutions Group within our Communications Solutions Group to enable us to create improved go-to market and product development alignment as well as accelerate solution synergies as new technologies emerge. As a result of this organizational change, we have two reportable operating segments, Communications Solutions Group (“CSG”) and Electronic Industrial Solutions Group (“EISG”). Prior period segment results were revised to conform to the current presentation.

The profitability of each ~~segment~~of the segments is measured after excluding share-based compensation expense, amortization of acquisition-related balances, acquisition and integration costs, ~~restructuring and~~a gain on an insurance settlement related ~~costs,~~to northern California ~~wildfire-related impacts,~~wildfires, restructuring costs, interest income, interest expense and other items.

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. ~~Prior period amounts have been revised to conform to our new organizational structure described previously in the Segment Overview.~~

~~Net~~ Revenue

Three Months Ended Nine Months Ended
Year over Year Change

July 31, July 31,
Three Nine

2020 2019 2020 2019
Months Months

(in millions) (in millions)

Net revenue $ 760
$ 793
$ 2,231
$ 2,339
(4)% (5)%


	Three Months Ended				Nine Months Ended				Year over Year Change
	July 31,				July 31,				Three	Nine
	2021		2020		2021		2020		Months	Months
	(in millions)				(in millions)
Total revenue	$	875	$	760	$	2,604	$	2,231	15%	17%

The Communications Solutions Group revenue for the three and nine months ended July 31, ~~2020 decreased 4~~2021 increased 15 percent and 517 percent, respectively, when compared to the same periods last year and declined 5 percent for each comparable period excluding the impact of acquisitions. For the three and nine months ended July 31, 2020, foreign currency movements had an immaterial impact on revenue. For the three months ended July 31, 2020, revenue declined in aerospace, defense and government, partially offset by growth in commercial communications end markets, primarily driven by site closures and supply chain disruptions due to the impact of the COVID-19 pandemic. For the nine months ended July 31, 2020, revenue declinedyear. Revenue grew in both the aerospace, defense and government and the commercial communications ~~end markets primarily driven by site closures and supply chain disruptions. Revenue declined in the Americas and Europe, partially offset by~~markets. Foreign currency movements had a favorable impact of 1 percent on year-over-year revenue growth ~~in Asia Pacific~~ for both the three and nine months ended July 31, ~~2020.~~2021. Revenue associated with acquisitions had a favorable impact of 1 percent for the three months ended July 31, 2021 and an immaterial impact for the nine months ended July 31, 2021. For the three months ended July 31, 2021, revenue growth in the Americas and Europe was partially offset by a decline in Asia Pacific. For the nine months ended July 31, 2021, revenue grew across all regions.

~~Revenue from the~~The commercial communications market ~~represented 74 percent and 72 percent, respectively, of the total Communications Solutions Group~~ revenue for the three and nine months ended July 31, ~~2020, and~~2021 increased 26 percent and ~~decreased 2~~10 percent year-over-year, ~~respectively.~~respectively, and represented 68 percent of the total Communications Solutions Group revenue for both the periods. The revenue growth was driven by improved economic conditions across the communications ecosystem, partially offset by the impact of China trade restrictions. For the three months ended July 31, ~~2020,~~2021, revenue growth in ~~Asia Pacific~~the Americas and Europe was partially offset by a decline in ~~the Americas and Europe.~~Asia Pacific. For the nine months ended July 31, ~~2020,~~2021, revenue ~~decline~~grew in the Americas and Europe, ~~was offset by growth~~while remaining flat in Asia Pacific. We continue to see investments in 5G, fueled by the ongoing redesign of every aspect of communications systems, including wireless access, infrastructure, wireline technologies, data centers and the cloud.

~~Revenue from the~~The aerospace, defense and government market ~~represented 26 percent and 28 percent, respectively, of the total Communications Solutions Group~~ revenue for the three and nine months ended July 31, ~~2020, and decreased 17~~2021 increased 39 percent and 1134 percent year-over-year, ~~respectively.~~respectively, and represented 32 percent of the total Communications Solutions Group revenue for both the periods. For the three and nine months ended July 31, ~~2020,~~2021, revenue ~~declined~~grew across all regions. The strong revenue growth was driven by increased customer demand ~~in the United States was impacted by the supply chain disruptions~~ and ~~also by lower~~continued investment in ~~Europe and, to a lesser extent, in Asia. We continue to see strength for our~~space, satellite, electromagnetic spectrum ~~threat simulation platform, as well as solutions for radar, space, satellite,~~operations, and ~~5G.~~new commercial technologies like 5G and early 6G research applications.

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Gross Margin and Operating Margin

The following table provides the Communications Solutions Group margins, expenses and income from operations for the three and nine months ended July 31, ~~2020 versus~~2021 as compared to the ~~three and nine months ended July 31, 2019.~~same periods last year.


	Three Months Ended						Nine Months Ended						Year over Year Change			Three Months Ended						Nine Months Ended						Year over Year Change
	July 31,						July 31,						Three	Nine		July 31,						July 31,						Three	Nine
	2020			2019			2020			2019			Months	Months		2021			2020			2021			2020			Months	Months
Total gross margin	65.2		%	64.1		%	64.8		%	63.9		%	1 ppt	1 ppt	Total gross margin	65.7		%	65.2		%	65.0		%	64.8		%	1 ppt	—
Operating margin	25.9		%	24.1		%	23.0		%	22.7		%	2 ppts	—	Operating margin	25.6		%	25.9		%	25.7		%	23.0		%	—	3 ppts

in millions															in millions
Research and development	$	126		$	125		$	388		$	378		—	2%	Research and development	$	151		$	126		$	444		$	388		20%	14%
Selling, general and administrative	$	176		$	195		$	554		$	591		(9)%	(6)%	Selling, general and administrative	$	204		$	176		$	589		$	554		16%	6%
Other operating expense (income), net	$	(3	)	$	(2	)	$	(8	)	$	(7	)	24%	13%	Other operating expense (income), net	$	(3)		$	(3)		$	(10)		$	(8)		13%	23%
Income from operations	$	197		$	192		$	512		$	532		3%	(4)%	Income from operations	$	224		$	197		$	670		$	512		14%	31%

Gross margin for the three months ended July 31, ~~2020~~2021 increased 1 percentage point ~~when~~ compared to the same period last year, primarily driven by ~~favorable~~higher revenue ~~mix and highly differentiated solutions,~~volume, partially offset by ~~lower revenue volume due to site closures and supply chain disruptions.~~higher variable people-related costs. Gross margin for the nine months ended July 31, ~~2020 increased 1 percentage point when~~2021 was flat compared to the same period last year, as gains driven by ~~favorable~~higher revenue ~~mix and lower warranty costs, partially~~volume were offset by ~~lower revenue volume due to site closures~~higher variable people-related costs and ~~supply chain disruptions.~~warranty costs.

~~Research and development~~R&D expense for the three ~~months ended July 31, 2020 was flat when compared to the same period last year, driven by reduction in discretionary spending due to COVID-19 related restrictions~~ and ~~lower variable people-related costs, partially offset by incremental costs of an acquired business. Research and development expense for the~~ nine months ended July 31, ~~2020~~2021 increased 220 percent ~~when~~and 14 percent, respectively, compared to the same ~~period~~periods last year, primarily driven by greater ~~investment~~investments in key growth opportunities in our end markets and leading-edge technologies, ~~and incremental costs of an acquired business, partially offset by lower~~higher variable people-related costs and higher infrastructure related costs.

Selling, general and administrative expense for the three months ended July 31, 2021 increased 16 percent compared to the same period last year, primarily driven by higher selling, infrastructure-related and variable people-related costs. Selling, general and administrative expense for the nine months ended July 31, ~~2020 decreased 9 percent and~~2021 increased 6 percent ~~respectively, when~~ compared to the same ~~periods~~period last year, primarily driven by ~~lower~~higher selling, infrastructure-related and variable people-related costs, ~~infrastructure-related costs, decline~~partially offset by reductions in travel and marketing-related costs due to COVID-19 related ~~restrictions and lower discretionary expenses.~~restrictions.

Other operating expense (income), net ~~was income of $3 million and $8 million, respectively,~~ for the three and nine months ended July 31, ~~2020,~~2021 was income of $3 million and $10 million, respectively, compared to income of $2$3 million and $7$8 million, respectively, for the same periods last year.

Income from Operations

Income from operations for the three and nine months ended July 31, ~~2020~~2021 increased $5$27 million and ~~decreased $20~~$158 million, respectively, on a corresponding revenue ~~decrease~~increases of ~~$33~~$115 million and ~~$108~~$373 million, respectively, ~~for~~compared to the same periods last year.

Operating margin ~~increased 2 percentage points~~ for the three months ended July 31, ~~2020,~~2021 was flat compared to the same period last year, driven by gross margin related gains complemented by lower operating expenses due to COVID-19 related restrictions. Operating margin was flat for the nine months ended July 31, 2020 compared to the same periodperiods last year, as ~~gross margin related~~ gains from higher revenue volume were offset by higher operating expenses as a ~~percent~~percentage of ~~revenue.~~sales. Operating margin for the nine months ended July 31, 2021 increased 3 percentage points, primarily driven by higher revenue volume and lower selling, general and administrative expenses as a percentage of sales, partially offset by an increase in variable people-related costs.

Electronic Industrial Solutions Group

The Electronic Industrial Solutions Group provides test and measurement solutions and related services across a broad set of electronic industrial end markets, focusing on high-value applications in the automotive and energy ~~industry~~industries and measurement solutions for consumer electronics, education, general electronics design and manufacturing, and semiconductor design and ~~manufacturing.The~~manufacturing. The group provides electronic measurement instruments, design and test software ~~electronic measurement instruments~~ and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic ~~equipment.~~equipment, and automated software test that include artificial intelligence and machine learning to automatically identify, build and execute tests critical to digital business success and a strong customer experience.

~~Net~~

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Revenue

Three Months Ended Nine Months Ended Year over Year Change
July 31, July 31, Three Nine
2020 2019 2020 2019 Months Months
(in millions) (in millions)
Net revenue $ 251
$ 295
$ 770
$ 851
(15)% (9)%


	Three Months Ended				Nine Months Ended				Year over Year Change
	July 31,				July 31,				Three	Nine
	2021		2020		2021		2020		Months	Months
	(in millions)				(in millions)
Total revenue	$	371	$	251	$	1,043	$	770	48%	35%

The Electronic Industrial Solutions Group revenue for the three and nine months ended July 31, ~~2020 decreased 15~~2021 increased 48 percent and 935 percent, respectively, ~~when~~ compared to the same periods last ~~year and declined 16~~year. Revenue associated with acquisitions had a favorable impact of 2 percent and 103 percent respectively, excluding the impact of acquisitions. For the three and nine months ended July 31, 2020, foreign currency movements had an immaterial impact on revenue. The revenue decline was primarily driven by site closures and supply chain disruptions due to the impact of the COVID-19 pandemic in the last half of the second quarter and continuing into the third quarter. Declines in general electronics measurement and automotive and energy were partially offset by growth in semiconductor measurement solutions, driven by continued investments in next-generation technologies. Revenue declined across all regions for the three and nine months ended July 31, ~~2020 compared to~~2021. Foreign currency movements had a favorable impact of 2 percent on the ~~same periods last year with exception of Europe, which grew~~year-over-year revenue growth for both the three and nine months ended July 31, ~~2020.~~

2021. While we continue to see investments in next-generation semiconductor technologies and growth in general electronics measurement, we also see improved macro conditions in the automotive market and increased investment in new mobility technologies. Revenue grew across all regions for both the three and nine months ended July 31, 2021.

Gross Margin and Operating Margin

The following table shows the Electronic Industrial Solutions Group margins, expenses and income from operations for the three and nine months ended July 31, ~~2020 versus~~2021 as compared to the same periods last year.


	Three Months Ended						Nine Months Ended						Year over Year Change
	July 31,						July 31,						Three	Nine
	2021			2020			2021			2020			Months	Months
Total gross margin	63.7		%	62.4		%	63.7		%	61.8		%	1 ppt	2 ppts
Operating margin	31.0		%	26.5		%	29.6		%	25.8		%	5 ppts	4 ppts

in millions
Research and development	$	52		$	40		$	153		$	120		29%	28%
Selling, general and administrative	$	71		$	51		$	206		$	161		38%	28%
Other operating expense (income), net	$	(2)		$	(1)		$	(4)		$	(3)		3%	18%
Income from operations	$	115		$	67		$	309		$	199		73%	56%

Gross margin for the three months ended July 31, 2021 increased 1 percentage point compared to the same period last year, primarily driven by higher revenue volume, lower infrastructure-related costs and lower warranty costs, partially offset by higher variable people-related costs. Gross margin for the nine months ended July 31, 2021 increased 2 percentage points compared to the same period last year, primarily driven by higher revenue volume, favorable mix and lower infrastructure- related costs.

R&D expense for the three and nine months ended July 31, ~~2019.~~

Three Months Ended Nine Months Ended Year over Year Change
July 31, July 31, Three Nine
2020 2019 2020 2019 Months Months
Total gross margin 62.4 % 61.5 % 61.8 % 60.7 % 1 ppt 1 ppt
Operating margin 26.5 % 28.1 % 25.8 % 25.2 % (2) ppts 1 ppt

in millions
Research and development $ 40
$ 39
$ 120
$ 120
2% (1)%
Selling, general and administrative $ 51
$ 61
$ 161
$ 184
(15)% (12)%
Other operating expense (income), net $ (1 ) $ (1 ) $ (3 ) $ (3 ) 62% 35%
Income from operations $ 67
$ 83
$ 199
$ 215
(20)% (7)%

~~Gross margin~~2021 increased ~~1 percentage point for both the three~~29 percent and ~~nine months ended July 31, 2020~~28 percent, respectively, compared to the same periods last year, primarily driven by ~~favorable mix, partially offset by lower revenue volume due to site closures~~greater investments in key growth opportunities in our end markets and ~~supply chain disruptions in the last half of the second quarter and continuing into the third quarter.~~

~~Research and development expense for the three months ended July 31, 2020 increased 2 percent compared to the same period last year, primarily driven by~~leading-edge technologies, incremental costs of an acquired ~~business. Research~~business and development expense for the nine months ended July 31, 2020 decreased 1 percent compared to the same period last year, primarily driven by a reduction in discretionary spending due to COVID-19 related restrictions and lowerhigher variable people-related costs.

Selling, general and administrative expense for the three and nine months ended July 31, ~~2020 decreased 15~~2021 increased 38 percent and 1228 percent, respectively, compared to the same periods last year, primarily due to ~~lower~~higher selling, ~~costs, marketing-related costs,~~ infrastructure-related ~~costs~~ and variable people-related ~~costs.~~costs and incremental costs of an acquired business.

Other operating expense (income), net for the three and nine months ended July 31, ~~2020~~2021 was income of $1$2 million and $3$4 million, respectively. Other operating expense (income), net for the three and nine months ended July 31, ~~2019~~2020 was income of $1 million and $3 million, respectively.

Income from Operations

Income from operations for the three and nine months ended July 31, ~~2020 decreased $16~~2021 increased $48 million ~~each,~~and $110 million, respectively, on a corresponding revenue ~~decrease~~increases of ~~$44~~$120 million and ~~$81~~$273 million, respectively, ~~when~~ compared to the same periods last year.

Operating margin for the three and nine months ended July 31, ~~2020 decreased 2~~2021 increased 5 percentage points ~~when~~and 4 percentage points, respectively, compared to the same ~~period~~periods last year, primarily driven by ~~lower revenue volume, partially offset by favorable mix~~gross margin gains and lower operating expenses ~~due~~as a percentage of sales.

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Financial Condition

Liquidity and Capital Resources

Our cash, cash equivalents and restricted cash, total debt and revolving credit facility were as follows:


	July 31, 2021		October 31, 2020
	(in millions)
Cash, cash equivalents and restricted cash	$	2,170	$	1,767
Total debt (par value)	$	1,800	$	1,800
Revolving credit facility	$	750	$	450

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 + 1.125 percent. In addition, the new credit agreement permits the company, subject to ~~COVID-19 related restrictions. Operating margin~~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. As of July 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 nine months ended July 31, 2020 increased 1 percentage point when compared to the same period last year, primarily driven by favorable mix and lower operating expenses due to COVID-19 related restrictions, partially offset by a decline in revenue volume.

~~FINANCIAL CONDITION~~

~~Liquidity and Capital Resources~~

~~Our financial position as of July 31, 2020 consisted of cash, cash equivalents and restricted cash of $1,703 million as compared to $1,600 million as of October 31, 2019.~~2021.

As of July 31, ~~2020,~~2021, approximately ~~$805~~$1,411 million of our cash, cash equivalents and restricted cash was held outside of the United States in our foreign subsidiaries. Our cash and cash equivalents mainly consist ~~mainly~~ of investments in institutional money market funds, short-term deposits held at major global financial institutions ~~investments in institutional money market funds,~~ and similar short duration instruments with original maturities of 90 days or less. We continuously monitor the creditworthiness of the financial institutions in which we invest our funds. We utilize a variety of funding strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. Most significant international locations have access to internal funding through an offshore cash pool for working capital needs. In addition, a few locations that are unable to access internal funding have access to temporary local overdraft and short-term working capital lines of credit.

Although recent disruption and volatility in global capital markets due to the ongoing COVID-19 pandemic has not had a significant impact on our financial position, liquidity, and ability to meet our debt covenants, we continue to monitor the capital markets and general global economic conditions. Given the uncertainty of the duration or severity of the pandemic, we have taken proactive measures to reduce costs and preserve liquidity, while supporting our customers and advancing key projects. These measures include a temporary hiring freeze and other discretionary spending, along with lower variable compensation and a reduction in outsourced manufacturing costs, enabled by our flexible cost structure.

We believe our cash and cash equivalents, cash generated from operations, and our ability to access capital markets and credit lines will satisfy, for at least the next twelve months, our liquidity requirements, both globally and domestically, including the following: working capital needs, capital expenditures, business acquisitions, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with our operations. Cash generated from our operations provides our primary source of cash flows. In addition, we utilized certain provisions of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted by the U.S. Government to provide additional short-term liquidity, including relief from employer payroll tax remittance, and expect to continue utilizing these benefits throughout 2020. Given the uncertain duration and severity of the COVID-19 pandemic, we could experience significant fluctuations in our future

Our key cash from operations from the ongoing impacts of the pandemic because of the adverse global macroeconomic environment and our customers ability to pay. For further discussion of risks related to the COVID-19 pandemic on our operations, business results and financial condition, see “Item 1A. Risk Factors.”flow activities were as follows:


	Nine Months Ended
	July 31,
	2021		2020
	(in millions)
Net cash provided by operating activities	$	954	$	678
Net cash used in investing activities	$	(238)	$	(379)
Net cash used in financing activities	$	(317)	$	(198)

Net Cash Provided by Operating Activities

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

Net cash provided by operating activities ~~was $678~~increased $276 million ~~for~~during the nine months ended July 31, ~~2020,~~2021 compared to ~~$735 million for~~ the same period last year.

•Net income for the nine months ended July 31, ~~2020 decreased $16~~2021 increased $202 million compared to the same period last year. Non-cash adjustments ~~decreased $27~~to net income were higher by $16 million ~~primarily~~ due to ~~an adjustment for~~ a one-time prior-period gain of $32 million ~~resulting from~~related to an insurance ~~proceeds received for~~recovery of property, plant and equipment ~~damaged~~reflected as cash from investing activity, a $16 million loss on a partial settlement of our Netherlands defined benefit plan, a $11 million increase in ~~the 2017 California wildfires, which is reflected~~share-based compensation expense, a $11 million increase in ~~investing activities, a $7 million decrease in deferred tax expense~~depreciation and a $5$17 million ~~decrease~~increase from other miscellaneous non-cash activities, partially offset by a $6$56 million increase in ~~amortization expense, a $6 million increase in share-based compensation expense~~deferred tax benefits and a $4$14 million ~~increase~~decrease in ~~depreciation expense. Additionally, for the nine months ended July~~ amortization.

31 ~~2020 and 2019, we received insurance proceeds~~

Table of ~~$8 million and $15 million, respectively, associated with recovery from a 2016 Singapore warehouse fire.~~Contents

•The aggregate of accounts receivable, inventory and accounts payable used net cash of ~~$39~~$84 million during the first nine months of fiscal ~~2020~~2021 compared to net cash used of ~~$43~~$39 million in the comparable period last year, primarily due to higher revenue volume, timing of collections and payments as well as the impact of COVID-19 related site closures and supply chain disruptions in the prior year. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory and accounts payable depends upon the cash conversion cycle, which represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of shipments and purchases, as well as collections and payments in a period.

•The aggregate ~~of employee compensation and benefits, income taxes payable, deferred revenue and~~ other movements in assets and liabilities provided net ~~operating~~ cash of ~~$19~~$113 million during the first nine months of fiscal ~~2020~~2021 compared to net cash provided of ~~$61~~$10 million in the comparable period last ~~year. The decline is~~year, primarily due to ~~lower~~higher variable compensation accruals, net of payments, and higher cash inflow from deferred revenue ~~lower variable compensation accruals and lower insurance recoveries related to the northern California wildfires, partially offset by an increase in cash from income taxes payable~~ as compared to the same period last year.

•

~~We contributed $6 million to our non-U.S. defined benefit plans during the first nine months of fiscal 2020 compared to $21 million in the sam~~e period last year. For the remainder of 2020, we expect to contribute $2 million to our non-U.S. defined benefit plans. For the nine months ended July 31, 2020, we did not contribute to our U.S. defined benefit plans or U.S. post-retirement benefit plan. For the remainder of ~~2020, we are evaluating potential contributions to our U.S. defined benefit plans, although a contribution is not required.~~

Net Cash Used in Investing Activities

Net cash used in investing activities ~~was $379~~decreased $141 million ~~for~~during the nine months ended July 31, ~~2020 as~~2021 compared to ~~$169 million for~~ the same period last year. For the nine months ended July 31, ~~2020,~~2021, we used ~~$319~~$102 million, net of $11 million cash acquired, for the acquisition of ~~Eggplant,~~Sanjole Inc., a ~~software~~leader in wireless test ~~automation platform provider that uses artificial intelligence~~ and ~~analytics to automate~~

~~test creation~~measurement solutions for protocol decoding and ~~test execution and~~interoperability. Additionally, we used $5$34 million, net of cash acquired, for ~~a small acquisition.~~other acquisition activity. For the nine months ended July 31, 2021 and 2020, investments in property, plant and equipment were $101 million and $87 million, respectively. For the nine months ended July 31, 2020, ~~and 2019, investments in property, plant and equipment were $87 million and $90 million, respectively, partially offset by~~we received $32 million of insurance proceeds for property, plant and equipment damaged in the 2017 northern California ~~wildfires. For the nine months ended July 31, 2019,~~wildfires, and we used ~~$90~~$324 million ~~net of $56 million cash acquired,~~ for the acquisition of Prisma Telecom Testing, a global provider of radio access network test solutions, partially offset by proceeds received of $7 million from the sale of a cost-method investment and $4 million from other investing activities.acquisitions.

We anticipate total fiscal ~~2020~~2021 capital spending to be approximately ~~$115 million.~~$170 million, mainly driven by capital investments to increase the resiliency of our supply chains.

Net Cash Used in Financing Activities

~~For~~Net cash used in financing activities increased $119 million during the nine months ended July 31, ~~2020, we used $198 million for financing activities, which included $196 million for~~2021 compared to the same period last year primarily due to higher treasury stock repurchases, $52 million for tax payments related to net share settlement of equity awards and $7 million for repayment of debt assumed with the acquisition of Eggplant, partially offset by proceeds of $57 million from issuance of common stock under employee stock plans.repurchases.

Treasury Stock Repurchases

On ~~May 29, 2019, the Board~~November 18, 2020, our board of ~~Directors~~directors approved a new stock repurchase program authorizing the purchase of up to ~~$500~~$750 million of the company’s common stock. 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. ~~At July 31, 2020, the maximum approximate dollar value~~See "Issuer Purchases of ~~shares of common stock that may yet be purchased~~Equity Securities" under ~~the program was $215 million.~~Part II Item 2 for additional information.

~~For the nine months ended July 31, 2019, we used $91~~Contractual and Other Obligations

Our contractual obligations for commitments to contract manufacturers and suppliers increased to $465 million for financing activities, including $130 million for treasury stock repurchases and $26 million for tax payments related to net share settlement of equity awards, partially offset by proceeds of $65 million from issuance of common stock under employee stock plans.

~~Short-Term Debt~~

~~Revolving Credit Facility~~

We maintain a credit facility (the “Revolving Credit Facility”) that provides for a $450 million, five-year unsecured revolving credit facility that will expire on February 15, 2022. In addition, the Revolving Credit Facility permits us to increase the total commitments under this credit facility by up to $150 million in the aggregate on one or more occasions upon request. We may use amounts borrowed under the facility for general corporate purposes. Asas of July 31, ~~2020 and~~2021 from $349 million as of October 31, ~~2019, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the nine months ended July 31, 2020.~~

~~Long-Term Debt~~

~~There have been no changes~~2020, driven by higher revenue and advance purchase orders to ~~the principal, maturity, interest rates and interest payment terms of the senior notes during the nine months ended July 31, 2020 as compared~~secure capacity for critical parts due to ~~the senior notes described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.~~

~~Other~~

global supply shortages. Our contractual obligations for other purchase commitments ~~decreased~~increased to ~~$53~~$62 million as of July 31, ~~2020~~2021 from ~~$69~~$52 million as of October 31, ~~2019 primarily due to optimization of contracts with certain suppliers.~~2020. There were no other material changes to the contractual commitments from our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2019, to our contractual commitments in the first three months of~~ 2020.

There were no material changes in our liabilities toward uncertain tax positions from our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2019.~~2020. We are unable to accurately predict when these will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months due to either the expiration of a statute of limitations or a tax audit settlement.

~~ITEM~~Item 3. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk appear in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2019.~~2020. There were no material changes during the nine months ended July 31, ~~2020~~2021 to this information reported in the company’s ~~2019~~2020 Annual Report on Form 10-K.

~~ITEM~~Item 4. ~~CONTROLS AND PROCEDURES~~Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

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Changes in Internal Control over Financial Reporting

Effective November 1, 2019, we adopted Accounting Standards Update ("ASU") 2016-02, Leases. Although the new lease standard is not expected to have a material impact on our operating results on an ongoing basis, we did implement changes to our processes related to lease control activities, including information systems. These included the development of new policies based on identifying leases, determining lease commencement, calculating the present value of leases, determining the incremental borrowing rate and gathering information for required disclosures.

We have not experienced any material impact to our internal controls over financial reporting due to the COVID-19 pandemic. We are continually monitoring and assessing the impact of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness. In the second quarter of 2020, the company implemented a new revenue recognition tool. While this did not change the way in which the company recognizes revenue, we did implement changes to our processes related to revenue recognition control activities, including information systems.

There were no ~~other~~ changes in our internal control over financial reporting during the third quarter of ~~2020, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act,~~fiscal 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART ~~II —~~II. OTHER INFORMATION

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings

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 the Consent Agreement, we will pay a penalty of $6.6 million, $2.5 million of which is suspended, over three years and will employ a special compliance officer for three years. We are also involved in lawsuits, claims, investigations and proceedings, including, but not limited to, patent, commercial ~~employment~~ and environmental matters, which arise in the ordinary course of business. ~~There~~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 ~~condition,~~position, results of operations or cash ~~flows.~~flows, the outcome of litigation is inherently uncertain and the outcome 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 a financial period.

~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors

Risks, Uncertainties and Other Factors That May Affect Future Results

Risks Related to Our Business

Global health crises, such as the COVID-19 pandemic, could have a material impact on our global operations and the operations of our supply chain, customers and vendors which could adversely impact our business results and financial condition.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. In response to the rapid global spread of the virus, national, state, and local governments issued orders and recommendations to attempt to reduce ~~the further~~ spread of the disease. Such orders included movement control and shelter-in-place orders, travel restrictions, limitations on public gatherings, school closures, social distancing requirements and the closure of all but critical and essential services and infrastructure. In response to these measures and toTo protect the health and safety of our employees, we temporarily closed our facilities globally and asked ~~all~~ employees who can work from home to do so for the foreseeable future, made substantial changes to employee travel policies, and canceled training and marketing events or moved them to a virtual format. As a supplier to some critical and essential businesses, we have restarted on-site operations using only employeesfuture. Employees who ~~are~~were not able to work effectively from home ~~and where doing so is~~were brought back to work at our sites with strict safety protocols in place, which are in compliance with local regulations, recommendations from our medical director and ~~our~~guidance from the Centers for Disease Control and the World Health Organization. Fluctuation in infection rates have continued and the appearance of new and more easily transmitted variants of COVID-19, ~~safety procedures. Our customers, suppliers~~such as the Delta variant, have resulted in periodic changes in restrictions that vary from region to region and ~~vendors are all subject to these restrictions~~require vigilant attention and ~~orders and are similarly impacted.~~rapid response.

The uncertain duration and severity of the pandemic caused by COVID-19 and its variants, as well as ~~the possibility of additional~~continued periodic spikes in infection rates, local outbreaks of the virus and its variants or potential outbreaks on our sites or supplier, customer or vendor sites, in spite of safety measures or vaccinations, where available, could cause ~~further shutdowns of~~disruptions to our operations or those of our suppliers, customers or vendors. ~~Any outbreaks~~Outbreaks causing renewed implementation or extension of existing government orders could also impact the availability of our employees or other workers. As more is understood about the virus and how it is spread, new health orders and safety protocols could further impact our on site operations. Adverse impact to our suppliers could adversely impact our ability to procure components and materials, causing an inability to manufacture products or solutions. Customers could reduce spending, causing reduced demand for products and solutions, delayed

~~or canceled orders, and inability to pay for products and solutions. Lack of employee availability due to shutdowns caused by government orders, illness, or quarantine requirements~~workers, which could further impact our ability to manufacture, ship or deliver products and solutions to customers. ~~Continued implementation of measures to reduce the spread~~As new variants of the virus ~~may~~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 collaborate globally with customers, suppliers, and internal colleagues. ~~Continued uncertainty~~

The pandemic has led to a global semiconductor chip shortage, which could adversely impact our ability to procure critical components and ~~market volatility~~manufacture products. Global shifts in customer demand and raw material supply due to COVID-19 could result in ~~a national~~delayed or ~~global recession, which could create additional market~~canceled orders and ~~global financial instability.~~ our customers’ reduced spending, reduced demand for products and solutions, and their inability to pay for products and solutions.

These factors could materially and negatively impact our business results, operations, revenue, growth and overall financial condition.

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. Global and regional economic uncertainty, recession, or depression may impact our business, resulting in:

•reduced demand for our solutions, delays in the shipment of orders or increases in order cancellations;

•increased risk of excess and obsolete ~~inventories;~~inventory;

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•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.

In addition, global and regional macroeconomic developments, such as increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, 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. Financial difficulties experienced by our suppliers and customers, including distributors, due to economic volatility or negative changes could result in product delays, delays in payment or inability to pay us, and inventory issues. Economic risks related to accounts receivable could result in delays in collection and greater bad debt expense.

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. 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. However, due to the uncertainties and negative economic environment created by the current global pandemic, the markets we serve may experience increased volatility and may not experience the seasonality or cyclicality that we expect. Any decline in our customers' markets would likely result in a reduction in demand for our solutions and services. The broader semiconductor market is one of the drivers for our business, and therefore, a decrease in the semiconductor market could harm our business. Also, 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. Also, 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.

Economic and political policies favoring national interests could adversely affect our results of operations.

Nationalistic economic policies and political trends in the United States, the United Kingdom, the European Union, Singapore, Malaysia and China among other countries, such as opposition to globalization and free trade, sanctions or trade restrictions, withdrawal from or re-negotiation of global trade agreements, tax policies that favor domestic industries and interests, the distancing or potential exit of other countries from the European Union, and other similar actions may result in increased transaction costs, reduced ability to hire employees, reduced access to supplies and materials, reduced demand or access to customers in international markets, and inability to conduct our operations as they have been conducted historically. Each of these factors may adversely affect our business.

International trade disputes and increased tariffs between the United States and such jurisdictions could substantially change our expectations and ability to operate in such jurisdictions as we have done historically. Many of our suppliers, vendors, customers, partners, and other entities with whom we do business have strong ties to doing business in China. Their ability to supply materials to us, buy products or services from us, or otherwise work with us is affected by their ability to do business in China. The existing state of the U.S.’s relationship with China could result in additional trade disputes, trade protection measures, retaliatory actions, tariffs and increased barriers, policies that favor domestic industries, or increased import or export licensing requirements or restrictions, then our deployment of resources in jurisdictions affected by such measures could be misaligned and our operations may be adversely affected due to such changes in the economic and political ecosystem in which our suppliers, vendors, customers, partners, and other entities with whom we do business operate.

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. Tariffs on imports to or from China could increase the cost of our customers’ components and raw materials, which could make our customers’ products and services more expensive and could reduce demand for our customers’ products. Protectionist and retaliatory trade measures by either China or the United States could limit our customers’ ability to sell their products and services and could reduce demand of our customers’ products. Our customers and other entities in our customer chain could decide to take actions in response to international trade disputes that we could not foresee. A decrease in demand or significant change in operations from our customers due to international trade disputes could adversely affect our operating results and financial condition.

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alternative solution to compensate for our inability to continue to do business with such customer or supplier. Some of our suppliers and customers in the supply chain are working on unique solutions and products in the market, and it may be difficult if not impossible to replace them, especially with short notice. We cannot predict what impact future sanctions could have on our customers or suppliers, and therefore, our business. Any export restrictions or sanctions and any tariffs or other trade restriction imposed on our customers or suppliers could adversely affect our financial condition and business.

Economic, political, and other risks associated with international sales and operations could adversely affect our results of operations.

Because we sell our solutions worldwide, our business is subject to risks associated with doing business internationally. We anticipate that revenue from international operations will continue to represent a majority of our total revenue. However, there can be no assurances that our international sales will continue at existing levels or grow in accordance with our effort to increase foreign market penetration. In addition, many of our employees, contract manufacturers, suppliers, job functions and manufacturing facilities are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including but not limited to:

•negative impact of a country’s response to the global COVID-19 pandemic or an imposed reduction in economic activity and other economic and political measures taken to contain the spread of COVID-19;

•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 consequences from changes in tax laws;

•difficulty in protecting intellectual property;

•interruption 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.

We centralize most of our accounting processes at two locations: India and Malaysia. These processes include general accounting, inventory cost accounting, accounts payable and accounts receivables functions. If conditions change in those countries, it may adversely affect operations, including impairing our ability to pay our suppliers. Our results of operations, as well as our liquidity, may be adversely affected and possible delays may occur in reporting financial results.

Further, even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage similar risks.

Failure to introduce successful new solutions and services in a timely manner to address increased competition, rapid technological changes, and changing industry standards could result in our solutions and services becoming obsolete.

We generally sell our solutions in industries that are characterized by increased competition through frequent new solution and service introductions, rapid technological changes and changing industry standards. In addition, many of the markets in which we operate are seasonal and cyclical. Without the timely introduction of new solutions, services and enhancements, our solutions and services will become technologically obsolete over time, in which case our revenue and operating results would suffer. 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 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;

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•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.

The COVID-19 global pandemic could impact our ability to execute on these dependencies. It may be difficult to differentiate ourselves from our competitors due to limited travel and access to customers, which could make it difficult to properly assess customer needs, and interruptions in manufacturing and delivery of solutions.

Our future operating results may fluctuate significantly if our investments in innovative technologies are not as profitable as we anticipate.

On a regular basis, we review the existing technologies available in the market and identify strategic new technologies to develop and invest in. We are currently devoting significant resources to the 5G technology and other new technologies in the 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. Our income could be harmed if we fail to gain sufficient market share, if demand for our solutions is lower than we expect, or if our income related to the innovative technologies is lower than we anticipate. For example, when the 5G standards are published, we may not be able to produce a satisfactory return on investment if our strategic vision and the resources that we are spending on developing our presence in the 5G technology industry turn out to be misaligned with such standards. We provide solutions for the design, development, and manufacturing stages of our customers’ workflow. Our customers who currently use our solutions in one stage of their workflow may not use our solutions in other aspects of their manufacturing process.

Failure to adjust our purchases due to changing market conditions or failure to estimate our customers' demand could adversely affect our income.

Our income could be harmed if we are unable to adjust our purchases to market fluctuations, including those caused by the seasonal or cyclical nature of the markets in which we operate. The sale of our solutions and services are dependent, to a large degree, on customers whose industries are subject to seasonal or cyclical trends in the demand for their products. For example, the consumer electronics market is particularly volatile, making demand difficult to anticipate. Making such estimations in the current economic climate affected by the global pandemic is particularly difficult as increased volatility may impact seasonal trends making it more difficult to anticipate demand fluctuations. During a market upturn, we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could materially affect our results. In the past, we have seen a shortage of parts for some of our products. 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. In addition to discontinuing parts, suppliers may also extend lead times, limit supplies or increase prices due to capacity constraints or other factors. The COVID-19 pandemic may further exacerbate these risks as suppliers are impacted by surging infection rates, possible shutdown orders or new safety ~~restrictions.~~restrictions and disruptions to their supply chain. In order to secure components for the production of products, we may continue to enter into non-cancellable purchase commitments with vendors, or at times make advance payments to suppliers, which could impact our ability to adjust our inventory to declining market demands. Prior commitments of this type have resulted in an excess of parts when demand for electronic products has decreased. If demand for our solutions is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges.

~~Economic and political policies favoring national interests could adversely affect our results of operations.~~

Nationalistic economic policies and political trends in the United States, the United Kingdom, the European Union, Singapore, Malaysia and China among other countries, such as opposition to globalization and free trade, sanctions or trade restrictions, withdrawal from or re-negotiation of global trade agreements, tax policies that favor domestic industries and interests, the exit of the United Kingdom from the European Union (known as Brexit), the distancing or potential exit of other countries from the European Union, and other similar actions may result in increased transaction costs, reduced ability to hire employees, reduced access to supplies and materials, reduced demand or access to customers in international markets, and inability to conduct our operations as they have been conducted historically. Each of these factors may adversely affect our business.

relationship with China deteriorates or results in trade disputes, trade protection measures, retaliatory actions, tariffs and increased barriers, policies that favor domestic industries, or increased import or export licensing requirements or restrictions, then our deployment of resources in jurisdictions affected by such measures could be misaligned and our operations may be adversely affected due to such changes in the economic and political ecosystem in which our suppliers, vendors, customers, partners, and other entities with whom we do business operate.

~~A decreased demand for our customers’ products or trade restrictions could adversely affect our results of operations.~~

In addition to the above, our customers and suppliers could become subject to U.S. export restrictions and sanctions, such as, being added to the U.S. Department of Commerce’s “Lists of Parties of Concern” and having U.S. export privileges denied or suspended. In the event that a customer or supplier of ours becomes subject to such sanctions, we will suspend our business with such customer or supplier. Because of the increasingly tense political and economic relationship between the United States and China, such sanctions could be imposed with little notice, which could leave us without an adequate alternative solution to compensate for our inability to continue to do business with such customer or supplier. Some of our suppliers and customers in the supply chain are working on unique solutions and products in the market, and it may be difficult if not impossible to replace them, especially with short notice. We cannot predict what impact future sanctions could have on our customers or suppliers, and therefore, our business. Any export restrictions or sanctions and any tariffs or other trade restriction imposed on our customers or suppliers could adversely affect our financial condition and business.

~~Economic, political, and other risks associated with international sales and operations could adversely affect our results of operations.~~

negative impact of a country’s response to the global COVID-19 pandemic or an imposed reduction in economic activity and other economic and political measures taken to contain the spread of COVID-19;

~~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 consequences from changes in tax laws;~~

~~difficulty in protecting intellectual property;~~

~~interruption 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.~~

Dependence on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring solutions to market and damage our reputation. Dependence on outsourced information technology and other administrative functions may impair our ability to operate effectively.

As part of our efforts to streamline operations and to cut costs, we outsource aspects of our manufacturing processes and other functions and continue to evaluate additional outsourcing. If our contract manufacturers or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring solutions to market and our reputation could suffer. For example, during a market upturn, our contract manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our customers' orders on a timely basis. The ability of these manufacturers to perform is largely outside of our control. Additionally, changing or replacing our contract manufacturers or other outsourced vendors could cause disruptions or delays. In addition, we outsource significant portions of our information technology ("IT") and other administrative functions. Since IT is critical to our operations, any failure of our IT providers to perform could impair our ability to operate effectively. 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.

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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 does not meet our expectations, our manufacturing capacity will likely exceed our production requirements. During a general market upturn or an upturn in our business, if we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfill orders in a timely manner, which could lead to order cancellations, contract breaches or indemnification obligations. 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.

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, trade restrictions, sanctions and embargos could force reductions in sales to or prevent us from selling large orders to certain key customers, which could impact our income, operating results and financial condition.

Certain key customers have substantial purchasing power and leverage in negotiating contractual arrangements with us. These customers may demand contract terms that differ considerably from our standard terms and conditions. Large orders may also include severe contractual liabilities for us if we fail to provide the quantity and quality of product at the required delivery times. While we attempt to contractually limit our potential liability under such contracts, we may have to agree to some or all of these types of provisions to secure these orders and to continue to grow our business. Such actions expose us to significant additional risks, which could result in a material adverse impact on our operating results and financial condition.

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. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that industry consolidation may result in stronger competitors and could lead to more variability in our operating results and could have a material adverse effect on our business, operating results, and financial condition. Furthermore, particularly in the communications market, rapid consolidation would lead to fewer customers, with the effect that loss of a major customer could have a material impact on results not anticipated in a customer marketplace composed of more numerous participants.

Additionally, if there is consolidation among our customer base, our customers may be able to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our profitability. In addition, if, as a result of increased leverage, customer pressures require us to reduce our pricing such that our gross margins are diminished, we could decide not to sell our solutions under such less favorable terms, which would decrease our revenue. Consolidation among our customer base

may also lead to reduced demand for our solutions, replacement of our products by the combined entity with those of our competitors and cancellations of orders, each of which could harm our operating results.

Our acquisitions, strategic alliances, joint ventures, internal reorganizations and divestitures may result in financial results that are different than expected.

In the normal course of business, we may engage in discussions with third parties relating to possible acquisitions, strategic alliances, joint ventures and divestitures. Additionally, we occasionally make changes to our internal structure to align business products, services and solutions with market demands and to obtain cost synergies and operational efficiencies. As a result of such transactions, our financial results may differ from our own or the investment community's expectations in a given fiscal quarter, or over the long term. If market conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such transactions or reorganizations. Further, such third-party transactions often have post-closing arrangements, including, but not limited to, post-closing adjustments, transition services, escrows or indemnifications, the financial results of which can be difficult to predict. In addition, acquisitions and strategic alliances may require us to integrate a different company culture, management team, employees and business infrastructure into our existing operations without impacting the business operations of the newly acquired company. 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. 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;

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•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, 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.

If we do not realize the expected benefits or synergies of such transactions, our consolidated financial position, results of operations, cash flows and stock price could be negatively impacted. Additionally, we may record significant goodwill and other assets as a result of acquisitions or investments, and we may be required to incur impairment charges, which could adversely affect our consolidated financial position and results of operations.

Any inability to complete acquisitions on acceptable terms could negatively impact our growth rate and financial performance.

Our ability to grow revenues, earnings and cash flow depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize anticipated synergies and business performance. 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. The inability to close appropriate acquisitions on acceptable terms could adversely impact our growth rate, revenue, and financial performance.

We may need additional financing in the future to meet our capital needs or to make opportunistic acquisitions, and such financing may not be available on terms favorable to us, if at all, and may be dilutive to existing shareholders.

We may need to seek additional financing for our general corporate purposes. For example, we may need to increase our investment in R&D activities or need funds to make acquisitions. We may be unable to obtain any desired additional financing on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to fund our expansion, successfully develop or enhance solutions or respond to competitive pressures, any of which could negatively affect our business. 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 raise additional funds by issuing debt, we may be subject to further limitations on our operations and ability to pay dividends due to restrictive covenants.

We have outstanding debt and may incur other debt in the future, which could adversely affect our financial condition, liquidity and results of operations.

We currently have outstanding debt as well as availability to borrow under a revolving credit facility. We may borrow additional amounts in the future and use the proceeds from any future borrowing for general corporate purposes, future acquisitions, expansion of our business or repurchases of our outstanding shares of common stock.

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;

•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 current revolving credit facility and term loan imposes restrictions on us, including restrictions on our ability to create liens on our assets and the ability of our subsidiaries to incur indebtedness, and requires us to maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control. In addition, the indenture governing our senior notes contains covenants that may adversely affect our ability to incur certain ~~liens or engage in certain types of sale and leaseback transactions.~~liens. If we breach

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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.

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. 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. Our hedging programs are designed to reduce, but not entirely eliminate, within any given 12-month period, the impact of currency exchange rate movements, including those caused by currency controls, which could impact our business, operating results and financial condition by resulting in lower revenue or increased expenses. However, for expenses beyond a 12-month period, our hedging strategy will not mitigate our exchange rate risk. In addition, our currency hedging programs involve third-party financial institutions as counterparties. The weakening or failure of these counterparties may adversely affect our hedging programs and our financial condition through, among other things, a reduction in the number of available counterparties, increasingly unfavorable terms or the failure of counterparties to perform under hedging contracts.

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. Volatile changes in weather conditions, including extreme heat or cold, could increase the risk of wildfires, floods, blizzards, hurricanes and other weather-related disasters. Disasters created by extreme conditions could cause significant damage to or destruction of our facilities resulting in temporary or long-term closures of our facilities and operations and significant expense for repair or replacement of damaged or destroyed facilities. 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.

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 ~~subject~~vulnerable to catastrophic loss due to ~~fire, flood, terrorism, epidemic, pandemic, or other~~ 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. 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. Pandemics, or epidemics, such as the recent coronavirus outbreak, could result in government or institutionally imposed travel bans or restrictions, quarantines, factory shutdowns and work stoppages. Long-term impacts could include supply chain volatility, resulting in a shortage of or inability to get parts, labor shortages due to prolonged illness or quarantine, loss of critical employees, slowdown or cancellation of orders, inability to ship orders, increased risk of excess inventory and adverse impact on our revenue. If such a disruption were to occur, we could breach our agreements, our reputation could be harmed and our business and operating results could be adversely affected. In addition, since we have consolidated our manufacturing facilities, we are more likely to experience an interruption to our operations in the event of a catastrophe in any one location. Although we carry insurance for property damage and business interruption, we do not carry insurance or financial reserves for interruptions or potential losses arising from earthquakes or terrorism. Also, our third-party insurance coverage will vary from time to time in both type and amount depending on availability, cost and our decisions with respect to risk retention. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain third-party insurance. 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.

Additionally, we and our customers and suppliers are vulnerable to the increasing impact of climate change. Volatile changes in weather conditions, including extreme heat or cold could result in increased risk of fire, flood, blizzards, hurricanes and other weather-related disasters. Disasters created by extreme conditions could cause catastrophic damage to our facilities or those of our customers or suppliers, resulting in temporary or long-term closures of our facilities and operations or those of customers or suppliers and significant expense for repair or replacement of damaged or destroyed facilities. This could result in adverse impact to the supply chain, damage to or destruction of inventory, inability to manufacture and deliver solutions, cancellation of orders, and breaches of customer contracts leading to reduced revenue.

Third parties may claim that we are infringing their intellectual property rights, and we could suffer significant litigation or licensing expenses or be prevented from selling solutions or services.

Third parties may claim that one or more of our solutions or services infringe their intellectual property rights. We analyze and take action in response to such claims on a case-by-case basis. Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and the uncertainty of intellectual property litigation and could divert our management and key personnel from business operations. A claim of intellectual property infringement could cause us to enter into a costly or restrictive license agreement (which may not be available under acceptable terms, or at all), require us to redesign certain of our solutions (which would be costly and time-consuming) and/or subject us to significant damages or an injunction against the development and sale of certain solutions or services. In certain of our businesses, we rely on third-party intellectual property licenses, and we cannot ensure that these licenses will be available to us in the future on terms favorable to us or at all.

Third parties may infringe our intellectual property rights, and we may suffer competitive injury or expend significant resources enforcing our intellectual property rights.

Our success depends in part on our proprietary technology, including technology we obtained through acquisitions. We rely on various intellectual property rights, including patents, copyrights, trademarks and trade secrets, as well as confidentiality

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provisions and licensing arrangements, to establish our proprietary rights. If we do not enforce our intellectual property rights successfully, our competitive position may suffer, which could harm our operating results.

Our pending patent, copyright and trademark registration applications may not be allowed or competitors may challenge the validity or scope of our patents, copyrights or trademarks. 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 distribution, we have applied for trademarks related to our new 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. 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. 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. 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 capture market share and could result in lost revenues to the company. 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.

We rely on several centralized IT systems to provide solutions and services, maintain financial records, retain sensitive data such as intellectual property, proprietary business information, and data related to customers, suppliers, and business partners, process orders, manage inventory, process shipments to customers and operate other critical functions. The ongoing maintenance and security of this information is pertinent to the success of our business operations and our strategic goals.

Despite our implementation of network security measures, our network may be vulnerable to cybersecurity attacks, computer viruses, break-ins and similar disruptions. Our network security measures include, but are not limited to, the implementation of firewalls, antivirus protection, patches, log monitors, routine backups, offsite storage, network audits, and routine updates and modifications. Despite our efforts to create these security barriers, we may not be able to keep pace as new threats emerge and it is virtually impossible for us to entirely eliminate this risk. Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. Any such event could

have a material adverse effect on our business, reputation, operating results and financial condition, and no assurance can be given that our efforts to reduce the risk of such attacks will be successful.

In addition, our IT systems may be susceptible to damage, disruptions, instability, or shutdowns due to power outages, hardware failures, telecommunication failures, user errors, implementation of new operational systems or software or upgrades to existing systems and software, catastrophes, overburdening of systems resulting from an increase of work from home employees due to COVID-19, or other unforeseen events. Such events could result in the disruption of business processes, network degradation and system downtime, along with the potential that a third party will exploit our critical assets such as intellectual property, proprietary business information and data related to our customers, suppliers and business partners. Further, such events could result in loss of revenue, loss of or reduction in purchase orders, inability to report financial information, litigation, regulatory fines and penalties, and other damage that could have a material impact on our business operations. 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.

We are or will be subject to ongoing tax examinations of our tax returns by the IRS and other tax authorities. An adverse outcome of any such audit or examination by the IRS or other tax authority could have a material adverse effect on our results of operations, financial condition and liquidity.

We are or will be subject to ongoing tax examinations of our tax returns by the IRS and other tax authorities in various jurisdictions. We regularly assess the likelihood of adverse outcomes resulting from ongoing tax examinations to determine the adequacy of our provision for income taxes. These assessments can require considerable estimates and judgments. Intercompany transactions associated with the sale of inventory, services, intellectual property and cost sharing arrangements are complex and affect our tax liabilities. The calculation of our tax liabilities involves uncertainties in the application of complex tax laws and regulations in multiple jurisdictions. The outcomes of these tax examinations could have an adverse effect on our operating results and financial condition. 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.

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Our operations may be adversely impacted by changes in our business mix or changes in the tax legislative landscape.

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. We cannot give any assurance as to what our effective tax rate will be in the future because, among other things, there is uncertainty regarding the tax policies of the jurisdictions where we operate. 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.

If tax laws or incentives change or cease to be in effect, our income taxes could increase significantly.

We are subject to federal, state, and local taxes in the United States and numerous foreign jurisdictions. We devote significant resources to evaluating our tax positions and our worldwide provision for taxes. 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. With the rise of economic and political policies that favor domestic interests, it is possible that more countries will enact tax laws that either increase the tax rates, or reduce or change the tax incentives available to multinational companies like ours. Upon a change in tax laws in any territory where we do significant business, ~~such as the U.S., the European Union, or Singapore,~~ we may not be able to maintain our current tax rate or qualify for or maintain the benefits of any tax incentives offered, to the extent such incentives are offered.

We currently benefit from tax incentives extended to certain of our foreign subsidiaries to encourage investment or employment, the most significant of which being Singapore. The Singapore tax incentives require that specific conditions be satisfied, which include achieving thresholds of employment, ownership of certain assets, as well as specific types of investment activities within Singapore. 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.

Our Singapore tax incentives are due for renewal in fiscal 2024, but we cannot guarantee that Singapore will not revoke the tax incentives earlier. Our taxes could increase if the existing Singapore incentives are not renewed upon revocation or expiration. We cannot guarantee that we will qualify for any new incentive regime that may exist in fiscal 2024, or that such conditions will be satisfied. 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. 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.

Our business will suffer if we are not able to retain and hire key personnel.

Our future success depends partly on the continued service of our key research, engineering, sales, marketing, manufacturing, executive and administrative personnel, including personnel joining our company through acquisitions. The markets in which we operate are dynamic, and we may need to respond with reorganizations, workforce reductions and site closures from time to time. We believe our pay levels are competitive within the regions that we operate. However, there is also intense competition for certain highly technical specialties in geographic areas in which we operate, and it may become more difficult to retain key employees. If we fail to retain and hire a sufficient number of these personnel, we may not be able to meet key objectives, such as launching effective product innovations and meeting financial goals, and maintain or expand our business.

If we fail to maintain satisfactory compliance with certain regulations, we may be subject to substantial negative financial consequences and civil or criminal penalties.

We and our customers are subject to various significant international, federal, state and local regulations, including, but not limited to, health and safety including regulations related to COVID-19, packaging, data privacy, product content, environmental, labor and import/export regulations. These regulations are complex, change frequently and have tended to become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy violations of these regulations. Any failure by us to comply with applicable government regulations could also result in cessation of our operations or portions of our operations, high financial penalties, product recalls or impositions of fines, and restrictions on our ability to carry on or expand our operations. If demand for our solutions is adversely affected or our costs increase, our business would suffer.

Our R&D, manufacturing and distribution operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. 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 believe that our properties and operations at

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our facilities comply in all material respects with applicable environmental and occupational health and safety laws. In spite of these efforts, no assurance can be given that we will be compliant with all applicable environmental and workplace health and safety laws and regulations and violations could result in civil or criminal sanctions, fines and penalties.

We have developed internal data handling policies and practices to comply with the General Data Protection Regulation (“GDPR”) in the European Union and data privacy regulations similar to GDPR in other jurisdictions. Our existing business strategy does not rely on aggregating or selling personally identifiable information, and as a general matter Keysight does not process personally identifiable information on behalf of our customers. We devote resources to keep up with the changing regulatory environment on data privacy in the jurisdictions where we do business. Despite our efforts, no assurance can be given that we will be compliant with data privacy regulations. New laws, amendments, or interpretations of regulations, industry standards, and contractual obligations relating to data privacy may require us to incur additional costs and restrict our business operations. If we fail to comply with GDPR or other data privacy regulation, we may be subject to significant financial fines and civil or criminal penalties, and may suffer damage to our reputation or brand, which could adversely affect our business and financial results.

In addition, our products and operations are also often subject to the rules of industrial standards bodies, like the International Standards Organization, as well as regulation by other agencies such as the U.S. Federal Communications Commission. We also must comply with work safety rules. If we fail to adequately address any of these regulations, our businesses could be harmed.

Failure to comply with anti-corruption laws could adversely affect our business and result in financial penalties.

Because we have 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. Although we actively maintain policies and procedures designed to ensure ongoing compliance with these laws and regulations, there can be no assurance that our employees, contractors or agents will not violate these policies and procedures. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on our business conduct and on our ability to offer our solutions in one or more countries, and could also materially affect our brand, ability to attract and retain employees, international operations, business and operating results.

Our business and financial results may be adversely affected by various legal and regulatory proceedings.

We are subject to legal proceedings, lawsuits and other claims in the normal course of business and could become subject to additional claims in the future, some of which could be material. The outcome of existing proceedings, lawsuits and claims may differ from our expectations because the outcomes of litigation are often difficult to reliably predict. Various factors or developments can lead us to change current estimates of liabilities and related insurance receivables where applicable, or permit us to make such estimates for matters previously not susceptible to reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. 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.

The Sarbanes-Oxley Act of 2002 requires us to furnish a report by management on the effectiveness of our internal control over financial reporting, among other things. We are devoting significant resources and time to comply with such internal control over financial reporting requirements. However, we cannot be certain that these measures will ensure that we design, implement

and maintain adequate control over our financial processes and reporting in the future, especially in the context of acquisitions of other businesses. Any difficulties in the assimilation of acquired businesses into our control system could harm our operating results or cause us to fail to meet our financial reporting obligations. 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.

Adverse conditions in the global banking industry and credit markets may adversely impact the value of our cash investments or impair our liquidity.

Our 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. 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.

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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. 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. Because it is unknown what the investment return on and the fair value of our pension assets will be in future years or what interest rates and discount rates may be at any point in time, no assurances can be given that applicable law will not require us to make future material plan contributions. Any such contributions could adversely affect our financial condition.

Environmental contamination from past operations could subject us to unreimbursed costs and could harm on-site operations and the future use and value of the properties involved, and environmental contamination caused by ongoing operations could subject us to substantial liabilities in the future.

Some of our properties are undergoing remediation by HP Inc. ("HP") for subsurface contaminations that were known at the time of Agilent's separation from HP in 1999. In connection with Agilent's separation from HP, HP and Agilent entered into an agreement pursuant to which HP agreed to retain the liability for this subsurface contamination, perform the required remediation and indemnify Agilent with respect to claims arising out of that contamination. Agilent has assigned its rights and obligations under this agreement to Keysight in respect of facilities transferred to us in the separation. As a result, HP will have access to a limited number of our properties to perform remediation. Although HP agreed to minimize interference with on-site operations at such properties, remediation activities and subsurface contamination may require us to incur unreimbursed costs and could harm on-site operations and the future use and value of the properties. In connection with the separation, Agilent will indemnify us directly for any liabilities related thereto. We cannot be sure that HP will continue to fulfill its remediation obligations or that Agilent will continue to fulfill its indemnification obligations.

In connection with the separation from Agilent, Agilent also agreed to indemnify us for any liability associated with contamination from past operations at all properties transferred from Agilent to Keysight. We cannot be sure that Agilent will fulfill its indemnification obligations.

Our current manufacturing processes involve the use of substances regulated under various international, federal, state and local laws governing the environment. As a result, we may become subject to liabilities for environmental contamination, and these liabilities may be substantial. 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.

Risks Related to Our Common Stock

Our share price may fluctuate significantly.

Our common stock is listed on ~~NYSE~~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;

•the impact of global pandemics, such as COVID-19;

•overall market fluctuations;

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•results from any material litigation or government investigations;

•changes in laws or regulations affecting our business; and

•general economic conditions and other external factors.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.

In addition, when the market price of a company’s shares drops significantly, shareholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of management and other resources.

We do not currently pay dividends on our common stock.

We do not currently pay dividends on our common stock. The payment of any dividends in the future, and the timing and amount thereof, to our stockholders fall within the discretion of our board of directors. The board's decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt, industry practice, legal requirements, regulatory constraints and other factors that ~~the~~our board of directors deems relevant. 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.

Our amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. 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).

In addition, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (the "DGCL"), this provision could also delay or prevent a change of control that some shareholders may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation (an "interested stockholder") shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85 percent of the voting stock of such corporation at the time

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the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of shareholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.

We believe these provisions will protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. 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.

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.

Our amended and restated certificate of incorporation provide that unless the board of directors otherwise determines, 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, will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to the company or our shareholders, any action asserting a claim against us or any of our directors or officers arising pursuant to any provision of the DGCL or Keysight's amended and restated certificate of incorporation or bylaws, or any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine. This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers.

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~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds

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 quarterly period ended July 31, ~~2020.~~2021.


Period	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)

May 1, 2021 through May 31, 2021	477,700	$138.15	477,700	$443,909,664
June 1, 2021 through June 30, 2021	91,100	$149.54	91,100	$430,286,406
July 1, 2021 through July 31, 2021	—	—	—	$430,286,406
Total	568,800		568,800

~~Period~~(1)

~~Total Number~~On November 18, 2020, our board 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⁾

~~May 1, 2020 through May 31, 2020~~

—

~~$215,387,127~~

~~June 1, 2020 through June 30, 2020~~

—

~~$215,387,127~~

~~July 1, 2020 through July 31, 2020~~

—

~~$215,387,127~~

~~Total~~

—



~~(1)~~	~~On May 29, 2019, the Board of Directors~~directors approved a new stock repurchase program authorizing the purchase of up to ~~$500~~$750 million of the company’s common stock. Under our stock ~~replacing a previously approved 2018 program authorizing the purchase of up to $350 million of the company’s common stock, of which $160 million remained. Under the new~~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.
(2)		The weighted average price paid per share of common stock does not include the cost of commissions.

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~~ITEM~~Item 6. ~~EXHIBITS~~

Exhibits



Exhibit
Number						Description
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Extension Schema Document

101.CAL						XBRL Extension Calculation Linkbase Document

101.LAB						XBRL Extension Label Linkbase Document

101.PRE						XBRL Extension Presentation Linkbase Document

101.DEF						XBRL Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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~~KEYSIGHT TECHNOLOGIES, INC.~~

~~SIGNATURE~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

KEYSIGHT TECHNOLOGIES, INC.



Dated:	~~September 1, 2020~~August 31, 2021	By:	/s/ Neil Dougherty
			Neil Dougherty
			Senior Vice President and Chief Financial Officer
			(Principal Financial Officer)


Dated:	~~September 1, 2020~~August 31, 2021	By:	/s/ John C. Skinner
			John C. Skinner
			Vice President and Corporate Controller
			(Principal Accounting Officer)

5248



					Page Number
Part I.			~~Page~~Financial Information		~~Number~~3
			~~Part I.~~Item 1.	~~Financial Information~~		3
	~~Item 1.~~	Condensed Consolidated Financial Statements (Unaudited)	3
				Condensed Consolidated Statement of Operations	3
				Condensed Consolidated Statement of Comprehensive Income	4
				Condensed Consolidated Balance Sheet	5
				Condensed Consolidated Statement of Cash Flows	6
				Condensed Consolidated Statement of Equity	7
				Notes to Condensed Consolidated Financial Statements	8
			Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623
			Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3632
			Item 4.	Controls and Procedures	3732
Part II.			Other Information		3733
			Item 1.	Legal Proceedings	3733
			Item 1A.	Risk Factors	3733
			Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5046
			Item 6.	Exhibits	5147
~~Signature~~Signatures					5248



	Three Months Ended July 31, 2020						Three Months Ended July 31, 2019
	Communications Solutions Group		Electronic Industrial Solutions Group		Total		Communications Solutions Group		Electronic Industrial Solutions Group		Total
	(in millions)						(in millions)
Region
Americas	$	321	$	44	$	365	$	375	$	68	$	443
Europe	94		65		159		120		62		182
Asia Pacific	345		142		487		297		165		462
Total net revenue	$	760	$	251	$	1,011	$	792	$	295	$	1,087

End Market
Aerospace, Defense & Government	$	202	$	0	$	202	$	243	$	0	$	243
Commercial Communications	558		0		558		549		0		549
Electronic Industrial	0		251		251		0		295		295
Total net revenue	$	760	$	251	$	1,011	$	792	$	295	$	1,087

Timing of Revenue Recognition
Revenue recognized at a point in time	$	624	$	216	$	840	$	687	$	269	$	956
Revenue recognized over time	136		35		171		105		26		131
Total net revenue	$	760	$	251	$	1,011	$	792	$	295	$	1,087



	Nine Months Ended July 31, 2020						Nine Months Ended July 31, 2019
	Communications Solutions Group		Electronic Industrial Solutions Group		Total		Communications Solutions Group		Electronic Industrial Solutions Group		Total
	(in millions)						(in millions)
Region
Americas	$	993	$	149	$	1,142	$	1,080	$	191	$	1,271
Europe	301		190		491		344		196		540
Asia Pacific	937		431		1,368		908		464		1,372
Total net revenue	$	2,231	$	770	$	3,001	$	2,332	$	851	$	3,183

End Market
Aerospace, Defense & Government	$	632	$	0	$	632	$	712	$	0	$	712
Commercial Communications	1,599		0		1,599		1,620		0		1,620
Electronic Industrial	0		770		770		0		851		851
Total net revenue	$	2,231	$	770	$	3,001	$	2,332	$	851	$	3,183

Timing of Revenue Recognition
Revenue recognized at a point in time	$	1,832	$	666	$	2,498	$	2,026	$	778	$	2,804
Revenue recognized over time	399		104		503		306		73		379
Total net revenue	$	2,231	$	770	$	3,001	$	2,332	$	851	$	3,183



	Nine Months Ended
	July 31, 2020			July 31, 2019
	(in millions)
Beginning balance	$	28		$	0
Costs capitalized on November 1, 2018 due to ASC 606 adoption	0			29
Costs capitalized during the period	49			47
Costs amortized during the period	(50		)	(50		)
Ending balance	$	27		$	26



	Other Intangible Assets as of July 31, 2020						Other Intangible Assets as of October 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Developed technology	$	916	$	705	$	211	$	876	$	578	$	298
Backlog	17		13		4		13		13		0
Trademark/Tradename	34		24		10		34		21		13
Customer relationships	363		171		192		316		139		177
Non-compete agreements	1		1		0		1		1		0
Total amortizable intangible assets	1,331		914		417		1,240		752		488
In-Process R&D	2		—		2		2		—		2
Total	$	1,333	$	914	$	419	$	1,242	$	752	$	490



	Amortization expense
	(in millions)
2020 (remainder)	$	58
2021	166
2022	88
2023	65
2024	26
Thereafter	$	14



	Fair Value Measurements at
	July 31, 2020										October 31, 2019
	Total		Level 1		Level 2		Level 3		Other		Total		Level 1		Level 2		Level 3		Other
	(in millions)
Assets:
Short-term
Cash equivalents
Money market funds	$	1,054	$	1,054	$	0	$	0	$	—	$	932	$	932	$	0	$	0	$	—
Derivative instruments (foreign exchange contracts)	7		0		7		0		—		2		0		2		0		—
Long-term
Equity investments	52		52		0		0		—		37		37		0		0		—
Equity investments - other	9		0		0		0		9		9		0		0		0		9
Total assets measured at fair value	$	1,122	$	1,106	$	7	$	0	$	9	$	980	$	969	$	2	$	0	$	9
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	9	$	0	$	9	$	0	$	—	$	6	$	0	$	6	$	0	$	—
Long-term
Deferred compensation liability	17		0		17		0		—		14		0		14		0		—
Derivative instruments (interest rate swaps)	7		0		7		0		—		0		0		0		0		—
Total liabilities measured at fair value	$	33	$	0	$	33	$	0	$	—	$	20	$	0	$	20	$	0	$	—



	Communications Solutions Group		Electronic Industrial Solutions Group		Total Segments
	(in millions)
Three months ended July 31, 2020:
Total net and segment revenue	$	760	$	251	$	1,011
Segment income from operations	$	197	$	67	$	264

Three months ended July 31, 2019:
Total net revenue	$	792	$	295	$	1,087
Amortization of acquisition-related balances	1		0		1
Total segment revenue	$	793	$	295	$	1,088
Segment income from operations	$	192	$	83	$	275