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 ~~JANUARY~~JULY 31, 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.)

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	☐

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 ~~February 26,~~August 27, 2021 was ~~185,994,432.~~184,195,849.

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TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

(Unaudited)


		Three Months Ended			Three Months Ended						Nine Months Ended
		January 31,			July 31,						July 31,
			2021			2020			2021		2020		2021		2020
Revenue:	Revenue:							Revenue:
Products	Products		$	970		$	902	Products	$	1,021	$	813	$	2,987	$	2,423
Services and other	Services and other		210			193		Services and other	225		198		660		578
Total revenue	Total revenue		1,180			1,095		Total revenue	1,246		1,011		3,647		3,001
Costs and expenses:	Costs and expenses:							Costs and expenses:
Cost of products	Cost of products		392			359		Cost of products	370		330		1,151		992
Cost of services and other	Cost of services and other		81			81		Cost of services and other	88		75		264		232
Total costs	Total costs		473			440		Total costs	458		405		1,415		1,224
Research and development	Research and development		199			187		Research and development	207		169		615		522
Selling, general and administrative	Selling, general and administrative		301			300		Selling, general and administrative	302		259		900		810
Other operating expense (income), net	Other operating expense (income), net		(5)			(35)		Other operating expense (income), net	(5)		(4)		(14)		(42)
Total costs and expenses	Total costs and expenses		968			892		Total costs and expenses	962		829		2,916		2,514
Income from operations	Income from operations		212			203		Income from operations	284		182		731		487
Interest income	Interest income		1			6		Interest income	1		1		2		11
Interest expense	Interest expense		(20)			(19)		Interest expense	(20)		(20)		(59)		(59)
Other income (expense), net	Other income (expense), net		2			12		Other income (expense), net	5		22		(1)		56
Income before taxes	Income before taxes		195			202		Income before taxes	270		185		673		495
Provision for income taxes	Provision for income taxes		23			39		Provision for income taxes	16		9		61		85
Net income	Net income		$	172		$	163	Net income	$	254	$	176	$	612	$	410

Net income per share:	Net income per share:							Net income per share:
Basic	Basic		$	0.93		$	0.87	Basic	$	1.38	$	0.94	$	3.31	$	2.19
Diluted	Diluted		$	0.92		$	0.86	Diluted	$	1.36	$	0.93	$	3.27	$	2.16

Weighted average shares used in computing net income per share:	Weighted average shares used in computing net income per share:					Weighted average shares used in computing net income per share:
Basic	Basic		186			188		Basic	184		187		185		187
Diluted	Diluted		188			191		Diluted	186		190		187		190

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

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

Three Months Ended
January 31,
2021 2020
Net income $ 172 $ 163
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $(5) and $(1) 18 1
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of 0 0 1
Foreign currency translation, net of tax benefit (expense) of 0 31 0
Net defined benefit pension cost and post retirement plan costs:
Change in net actuarial loss, net of tax expense of $5 and 0 14 17
Change in net prior service credit, net of tax benefit of 0 and $1 0 (2)
Other comprehensive income 63 17
Total comprehensive income $ 235 $ 180


	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

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

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions, except par value and share data)

(Unaudited)


		January 31, 2021		October 31, 2020			July 31, 2021		October 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,887	$	1,756	Cash and cash equivalents	$	2,153	$	1,756

Accounts receivable, net	Accounts receivable, net	654		606		Accounts receivable, net	677		606
Inventory	Inventory	760		757		Inventory	770		757
Other current assets	Other current assets	265		255		Other current assets	229		255
Total current assets	Total current assets	3,566		3,374		Total current assets	3,829		3,374
Property, plant and equipment, net	Property, plant and equipment, net	597		595		Property, plant and equipment, net	616		595
Operating lease right-of-use assets	Operating lease right-of-use assets	215		182		Operating lease right-of-use assets	231		182
Goodwill	Goodwill	1,588		1,537		Goodwill	1,610		1,537
Other intangible assets, net	Other intangible assets, net	356		361		Other intangible assets, net	283		361
Long-term investments	Long-term investments	62		61		Long-term investments	68		61
Long-term deferred tax assets	Long-term deferred tax assets	700		740		Long-term deferred tax assets	739		740
Other assets	Other assets	410		368		Other assets	428		368
Total assets	Total assets	$	7,494	$	7,218	Total assets	$	7,804	$	7,218
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:

Accounts payable	Accounts payable	$	228	$	224	Accounts payable	$	249	$	224
Employee compensation and benefits	Employee compensation and benefits	253		289		Employee compensation and benefits	294		289
Deferred revenue	Deferred revenue	456		391		Deferred revenue	476		391
Income and other taxes payable	Income and other taxes payable	56		64		Income and other taxes payable	47		64
Operating lease liabilities	Operating lease liabilities	42		43		Operating lease liabilities	41		43
Other accrued liabilities	Other accrued liabilities	89		70		Other accrued liabilities	92		70
Total current liabilities	Total current liabilities	1,124		1,081		Total current liabilities	1,199		1,081

Long-term debt	Long-term debt	1,790		1,789		Long-term debt	1,791		1,789
Retirement and post-retirement benefits	Retirement and post-retirement benefits	362		362		Retirement and post-retirement benefits	348		362
Long-term deferred revenue	Long-term deferred revenue	166		175		Long-term deferred revenue	179		175
Long-term operating lease liabilities	Long-term operating lease liabilities	184		149		Long-term operating lease liabilities	196		149
Other long-term liabilities	Other long-term liabilities	332		365		Other long-term liabilities	341		365
Total liabilities	Total liabilities	3,958		3,921		Total liabilities	4,054		3,921
Commitments and contingencies (Note 14)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)	0		0

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock; $0.01 par value; 100 million shares authorized; NaN issued and outstanding		0		0
Common stock; $0.01 par value; 1 billion shares authorized; 197 million shares at January 31, 2021 and 196 million shares at October 31, 2020 issued		2		2
Treasury stock at cost; 10.9 million shares at January 31, 2021 and 10.7 million shares at October 31, 2020		(772)		(752)
Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding						Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding	—		—
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	Additional paid-in-capital	2,134		2,110		Additional paid-in-capital	2,200		2,110
Retained earnings	Retained earnings	2,708		2,536		Retained earnings	3,148		2,536
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(536)		(599)		Accumulated other comprehensive loss	(528)		(599)
Total stockholders' equity	Total stockholders' equity	3,536		3,297		Total stockholders' equity	3,750		3,297
Total liabilities and equity	Total liabilities and equity	$	7,494	$	7,218	Total liabilities and equity	$	7,804	$	7,218

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

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

(Unaudited)

Three Months Ended
January 31,
2021 2020
Cash flows from operating activities:
Net income $ 172 $ 163
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 28 24
Amortization 59 56
Share-based compensation 43 39
Deferred tax expense 1 18
Excess and obsolete inventory-related charges 7 7
Gain on insurance proceeds received for damage to property, plant and equipment 0 (32)
Other non-cash expense (income), net 7 1
Changes in assets and liabilities:
Accounts receivable (38) (3)
Inventory 0 (36)
Accounts payable 4 (26)
Employee compensation and benefits (54) (63)
Deferred revenue 50 29
Income taxes payable (1) 10
Retirement and post-retirement benefits (1) (3)
Other assets and liabilities 18 13
Net cash provided by operating activities 295 197
Cash flows from investing activities:
Investments in property, plant and equipment (28) (32)
Acquisition of businesses and intangible assets, net of cash acquired (96) (5)
Insurance proceeds received for damage to property, plant and equipment 0 32
Net cash used in investing activities (124) (5)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans 28 26
Payment of taxes related to net share settlement of equity awards (49) (49)
Treasury stock repurchases (20) (76)
Payment of acquisition-related contingent consideration (2) 0
Net cash used in financing activities (43) (99)
Effect of exchange rate movements 8 0
Net increase in cash, cash equivalents, and restricted cash 136 93
Cash, cash equivalents, and restricted cash at beginning of period 1,767 1,600
Cash, cash equivalents, and restricted cash at end of period $ 1,903 $ 1,693


	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.

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KEYSIGHT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

(Unaudited)


		Common Stock					Treasury Stock										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			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 October 31, 2020		195,661	$	2	$	2,110	(10,732)	$	(752)	$	2,536	$	(599)	$	3,297
Balance as of April 30, 2021																Balance as of April 30, 2021	196,901	$	2	$	2,152	(12,461)	$	(992)	$	2,894	$	(511)	$	3,545
Net income	Net income	—	—		—		—	—		172		—		172		Net income	—	—		—		—	—		254		—		254
Other comprehensive income, net of tax		—	—		—		—	—		—		63		63
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—	—		—		—	—		—		(17)		(17)
Issuance of common stock	Issuance of common stock	1,193	—		28		—	—		—		—		28		Issuance of common stock	318	—		30		—	—		—		—		30
Taxes related to net share settlement of equity awards	Taxes related to net share settlement of equity awards	—	—		(49)		—	—		—		—		(49)		Taxes related to net share settlement of equity awards	—	—		(1)		—	—		—		—		(1)
Share-based compensation	Share-based compensation	—	—		45		—	—		—		—		45		Share-based compensation	—	—		19		—	—		—		—		19
Repurchase of common stock	Repurchase of common stock	—	—		—		(137)	(20)		—		—		(20)		Repurchase of common stock	—	—		—		(569)	(80)		—		—		(80)
Balance as of January 31, 2021		196,854	$	2	$	2,134	(10,869)	$	(772)	$	2,708	$	(536)	$	3,536
Balance as of July 31, 2021																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, 2019		193,769	$	2	$	2,013	(6,458)	$	(342)	$	1,909	$	(578)	$	3,004
Balance as of October 31, 2020																Balance as of October 31, 2020	195,661	$	2	$	2,110	(10,732)	$	(752)	$	2,536	$	(599)	$	3,297
Net income	Net income	—	—		—		—	—		163		—		163		Net income	—	—		—		—	—		612		—		612
Other comprehensive income, net of tax		—	—		—		—	—		—		17		17
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—	—		—		—	—		—		71		71
Issuance of common stock	Issuance of common stock	1,270	—		26		—	—		—		—		26		Issuance of common stock	1,558	—		59		—	—		—		—		59
Taxes related to net share settlement of equity awards	Taxes related to net share settlement of equity awards	—	—		(49)		—	—		—		—		(49)		Taxes related to net share settlement of equity awards	—	—		(52)		—	—		—		—		(52)
Share-based compensation	Share-based compensation	—	—		41		—	—		—		—		41		Share-based compensation	—	—		83		—	—		—		—		83
Repurchase of common stock	Repurchase of common stock	—	—		—		(732)	(75)		—		—		(75)		Repurchase of common stock	—	—		—		(2,298)	(320)		—		—		(320)
Balance as of January 31, 2020		195,039	$	2	$	2,031	(7,190)	$	(417)	$	2,072	$	(561)	$	3,127
Balance as of July 31, 2021																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																Balance as of April 30, 2020	195,107	$	2	$	2,044	(8,505)	$	(537)	$	2,143	$	(567)	$	3,085
Net income																Net income	—	—		—		—	—		176		—		176
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—	—		—		—	—		—		47		47
Issuance of common stock																Issuance of common stock	529	—		31		—	—		—		—		31
Taxes related to net share settlement of equity awards																Taxes related to net share settlement of equity awards	—	—		(2)		—	—		—		—		(2)
Share-based compensation																Share-based compensation	—	—		17		—	—		—		—		17
Repurchase of common stock																Repurchase of common stock	—	—		—		—	—		—		—		—
Balance as of July 31, 2020																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																Balance as of October 31, 2019	193,769	$	2	$	2,013	(6,458)	$	(342)	$	1,909	$	(578)	$	3,004
Net income																Net income	—	—		—		—	—		410		—		410
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—	—		—		—	—		—		58		58
Issuance of common stock																Issuance of common stock	1,867	—		57		—	—		—		—		57
Taxes related to net share settlement of equity awards																Taxes related to net share settlement of equity awards	—	—		(52)		—	—		—		—		(52)
Share-based compensation																Share-based compensation	—	—		72		—	—		—		—		72
Repurchase of common stock																Repurchase of common stock	—	—		—		(2,047)	(195)		—		—		(195)
Balance as of July 31, 2020																Balance as of July 31, 2020	195,636	$	2	$	2,090	(8,505)	$	(537)	$	2,319	$	(520)	$	3,354

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

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KEYSIGHT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly our financial position as of ~~January~~July 31, 2021 and October 31, 2020, ~~our~~ results of operations for the three and nine months ended ~~January~~July 31, 2021 and 2020 and cash flows for the ~~three~~nine months ended ~~January~~July 31, 2021 and 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. 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. 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, 2020.

New Accounting Pronouncements. Accounting standard updates induring the first ~~quarter~~nine months of fiscal 2021 that have been issued by the Financial Accounting Standards Board ~~(“FASB”)~~ 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.

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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 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.~~segments, Communications Solutions Group ("CSG") and Electronics Industrial Solutions Group ("EISG").


		Three Months Ended													Three Months Ended
		January 31,													July 31,
		2021						2020							2021						2020
		Communications Solutions Group		Electronic Industrial Solutions Group		Total		Communications Solutions Group		Electronic Industrial Solutions Group		Total			CSG		EISG		Total		CSG		EISG		Total
		(in millions)													(in millions)
Region	Region													Region
Americas	Americas	$	401	$	67	$	468	$	386	$	61	$	447	Americas	$	418	$	81	$	499	$	321	$	44	$	365
Europe	Europe	132		70		202		115		71		186		Europe	122		79		201		94		65		159
Asia Pacific	Asia Pacific	319		191		510		317		145		462		Asia Pacific	335		211		546		345		142		487
Total revenue	Total revenue	$	852	$	328	$	1,180	$	818	$	277	$	1,095	Total revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011

End Market	End Market													End Market
Aerospace, Defense & Government	Aerospace, Defense & Government	$	294	$	0	$	294	$	245	$	0	$	245	Aerospace, Defense & Government	$	280	$	—	$	280	$	202	$	—	$	202
Commercial Communications	Commercial Communications	558		0		558		573		0		573		Commercial Communications	595		—		595		558		—		558
Electronic Industrial	Electronic Industrial	0		328		328		0		277		277		Electronic Industrial	—		371		371		—		251		251
Total revenue	Total revenue	$	852	$	328	$	1,180	$	818	$	277	$	1,095	Total revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011

Timing of Revenue Recognition	Timing of Revenue Recognition													Timing of Revenue Recognition
Revenue recognized at a point in time	Revenue recognized at a point in time	$	712	$	284	$	996	$	701	$	250	$	951	Revenue recognized at a point in time	$	729	$	322	$	1,051	$	624	$	216	$	840
Revenue recognized over time	Revenue recognized over time	140		44		184		117		27		144		Revenue recognized over time	146		49		195		136		35		171
Total revenue	Total revenue	$	852	$	328	$	1,180	$	818	$	277	$	1,095	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 aswhen 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 software licenses and software subscriptions, including SaaS, or separately as part of our customer support programs.

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

Contract Balances

~~The timing~~Contract assets

Contract assets consist of ~~revenue recognition, billings and cash collections results in billed accounts receivable,~~ unbilled receivables ~~(contract assets)~~ and ~~deferred~~are recorded when 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 unbilled amounts from arrangements for which we have performed by transferring goods or services to the customer~~is recognized in advance of ~~invoicing for such goods~~scheduled billings to our customers. These amounts are primarily related to software and ~~services. 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 $51 million and~~balances were $61 million ~~at January~~as of both July 31, 2021 and October 31, 2020, respectively, and is included in "accounts receivables, net" in our condensed consolidated balance sheet.

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Contract costs

~~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:~~

Three Months Ended
January 31,
2021 2020
(in millions)
Beginning balance $ 31 $ 28
Costs capitalized during the period 21 16
Costs amortized during the period (18) (16)
Ending balance $ 34 $ 28
“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.~~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:

Three Months Ended
January 31,
2021 2020
(in millions)
Balance at October 31 $ 566 $ 510
Deferral of revenue billed in current period, net of recognition 214 161
Deferred revenue arising out of acquisitions 2 0
Revenue recognized that was deferred as of the beginning of the period (164) (132)
Foreign currency translation impact 4 0
Balance at January 31 $ 622 $ 539


	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 $338 million of revenue recognized in the nine months ended July 31, 2021 that was deferred as of the beginning of the period, approximately $72 million was recognized in the three months ended July 31, 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 ~~$353~~$365 million as of ~~January~~July 31, 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 ~~January~~July 31, 2021, we expect to recognize ~~39%~~15 percent of the revenue related to these unsatisfied performance obligations during the remainder of 2021, ~~36%~~45 percent during 2022, and ~~25%~~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

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Three Months Ended
January 31,
2021 2020
(in millions)
Cost of products and services $ 7 $ 5
Research and development 9 8
Selling, general and administrative 27 26
Total share-based compensation expense $ 43 $ 39

~~Share-based compensation capitalized within inventory was $2 million at both January 31, 2021 and January 31, 2020.~~

Performance awards based on total shareholder return ("TSR") are valued using a Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. The valuation is done once every year in the first quarter at the time of annual grants. The following assumptions were used to estimate the fair value of TSR based performance awards:

Three Months Ended
January 31,
2021 2020
Volatility of Keysight shares 36 % 28 %
Volatility of index 23 % 13 %
Price-wise correlation with selected peers 67 % 61 %

The estimated fair value of RSUs 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 0t grant option awards in the three months ended January 31, 2021 and 2020.

4. INCOME TAXES

The ~~company’s effective~~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 ~~rate was 11.6 percent and 19.1 percent~~expense for the three months ended ~~January~~July 31, 2021 ~~and 2020, respectively.~~ 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 $23 million and $39 million~~ for the three and nine months ended ~~January~~July 31, 2021, included a net discrete benefit of $26 million and ~~2020,~~$46 million, respectively. The income tax expense for the three and nine months ended ~~January~~July 31, ~~2021~~2020, included a net discrete benefit of ~~$11 million.~~$10 million and $5 million, respectively. The ~~income~~increase in discrete tax ~~expense~~benefit for the three months ended ~~January 31, 2020 included a net discrete expense of $3 million. The decrease in tax expense for the three months ended January~~July 31, 2021 iswas 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 increase in discrete tax benefit for the nine months ended July 31, 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 reduction in U.S. ~~states~~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 ~~$10~~$41 million and ~~$15~~$29 million for the ~~three~~nine months ended ~~January~~July 31, 2021 and 2020, respectively, resulting in a benefit to net income per share (diluted) of approximately ~~$0.05~~$0.22 and ~~$0.08~~$0.15 for the ~~three~~nine months ended ~~January~~July 31, 2021 and 2020, respectively. The Singapore tax incentive is due for renewal in ~~2024. The~~2024, and the Malaysia incentive ~~in Malaysia~~ is due for renewal in 2025.

The open tax years for the IRS and most U.S. states as of July 31, 2021 are from November 1, 2016 through the current tax year. ~~Keysight’s 2018 U.S. federal income tax return is currently under examination by the IRS. This is the year in which the~~The Tax Cuts and Jobs Act was enacted in December 2017 and ~~the~~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.~~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, 2015 through the current tax year. For certain foreign entities, the tax years remain open, at most, back to the year 2008. At this time, management does not believe that the outcome of any ongoing examination will have a material impact on our consolidated financial statements. We believe that 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 adjust our tax provision for income taxes in the period such resolution occurs.

Keysight’s 2008 Malaysian income tax return was examined by the 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

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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.

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			Three Months Ended						Nine Months Ended
		January 31,			July 31,						July 31,
			2021			2020			2021		2020		2021		2020
			(in millions)						(in millions)
Numerator:
Net income	Net income		$	172		$	163	Net income	$	254	$	176	$	612	$	410
Denominator:
Basic weighted-average shares	Basic weighted-average shares		186			188		Basic weighted-average shares	184		187		185		187
Potential common shares— stock options and other employee stock plans	Potential common shares— stock options and other employee stock plans		2			3		Potential common shares— stock options and other employee stock plans	2		3		2		3
Diluted weighted-average shares	Diluted weighted-average shares		188			191		Diluted weighted-average shares	186		190		187		190
Net income per share - basic								Net income per share - basic	$	1.38	$	0.94	$	3.31	$	2.19
Net income per share - diluted								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 RSUs. ~~Under~~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 months ended January 31, 2021 and 2020, 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 awards and RSUs, 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. We excluded approximately 251,000 shares~~not material for the three and nine months ended ~~January 31, 2021. The impact was immaterial for the three months ended January 31, 2020.~~

~~6. SUPPLEMENTAL CASH FLOW INFORMATION~~

~~Net cash paid for income taxes was $22 million and $9 million for the three months ended January 31, 2021 and 2020, respectively. Cash paid for interest was 0 for both the three months ended January~~July 31, 2021 and 2020.

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:

January 31, 2021 October 31, 2020
(in millions)
Cash and cash equivalents $ 1,887 $ 1,756
Restricted cash included in other current assets 14 9
Restricted cash included in other assets 2 2
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows $ 1,903 $ 1,767

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.

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~~7. INVENTORY~~

January 31, 2021 October 31, 2020
(in millions)
Finished goods $ 335 $ 342
Purchased parts and fabricated assemblies 425 415
Total inventory $ 760 $ 757

Inventory-related excess and obsolescence charges recorded in total cost of products was $7 million for both the three months ended January 31, 2021 and 2020. 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.

8.6. GOODWILL AND OTHER INTANGIBLE ASSETS

The goodwill balance as of ~~January~~July 31, 2021 and October 31, 2020 and the activity for the ~~three~~nine months ended ~~January~~July 31, 2021 for each of our reportable operating segments were as follows:


		Communications Solutions Group		Electronic Industrial Solutions Group		Total			CSG		EISG		Total
		(in millions)							(in millions)
Goodwill at October 31, 2020	Goodwill at October 31, 2020	$	984	$	553	$	1,537	Goodwill at October 31, 2020	$	984	$	553	$	1,537
Foreign currency translation impact	Foreign currency translation impact	2		8		10		Foreign currency translation impact	(7)		8		1
Goodwill arising from acquisitions	Goodwill arising from acquisitions	41		0		41		Goodwill arising from acquisitions	72		—		72
Goodwill at January 31, 2021		$	1,027	$	561	$	1,588
Goodwill at July 31, 2021								Goodwill at July 31, 2021	$	1,049	$	561	$	1,610

Components of goodwill:	Components of goodwill:							Components of goodwill:
Goodwill	Goodwill	$	1,693	$	553	$	2,246	Goodwill	$	1,693	$	553	$	2,246
Accumulated impairment losses	Accumulated impairment losses	(709)		0		(709)		Accumulated impairment losses	(709)		—		(709)
Goodwill at October 31, 2020	Goodwill at October 31, 2020	$	984	$	553	$	1,537	Goodwill at October 31, 2020	$	984	$	553	$	1,537
Goodwill	Goodwill	$	1,736	$	561	$	2,297	Goodwill	$	1,758	$	561	$	2,319
Accumulated impairment losses	Accumulated impairment losses	(709)		0		(709)		Accumulated impairment losses	(709)		—		(709)
Goodwill at January 31, 2021		$	1,027	$	561	$	1,588
Goodwill at July 31, 2021								Goodwill at July 31, 2021	$	1,049	$	561	$	1,610

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Other intangible assets as of ~~January~~July 31, 2021 and October 31, 2020 consisted of the following:


		January 31, 2021						October 31, 2020							July 31, 2021						October 31, 2020
		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value			Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
		(in millions)													(in millions)
Developed technology	Developed technology	$	942	$	793	$	149	$	915	$	749	$	166	Developed technology	$	958	$	854	$	104	$	915	$	749	$	166
Backlog	Backlog	17		15		2		17		14		3		Backlog	17		16		1		17		14		3
Trademark/Tradename	Trademark/Tradename	36		26		10		35		25		10		Trademark/Tradename	36		28		8		35		25		10
Customer relationships	Customer relationships	380		195		185		363		183		180		Customer relationships	381		220		161		363		183		180
Non-compete agreements	Non-compete agreements	3		1		2		1		1		0		Non-compete agreements	3		1		2		1		1		—
Total amortizable intangible assets	Total amortizable intangible assets	1,378		1,030		348		1,331		972		359		Total amortizable intangible assets	1,395		1,119		276		1,331		972		359
In-Process R&D	In-Process R&D	8		—		8		2		—		2		In-Process R&D	7		—		7		2		—		2
Total	Total	$	1,386	$	1,030	$	356	$	1,333	$	972	$	361	Total	$	1,402	$	1,119	$	283	$	1,333	$	972	$	361

During the ~~three~~nine months ended ~~January~~July 31, 2021, we acquired Sanjole Inc. ("Sanjole") for ~~$96~~$102 million, net of $11 million cash acquired, and recognized additions to goodwill and other intangible assets of ~~$41~~$49 million and $51 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. ~~All goodwill was assigned to the Communications Solutions Group.~~ 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 $24 million, customer relationships of $17 million and in-process R&D of $7 million. The estimated useful lives of developed technology and customer relationships isare 7 years and 9 years, respectively. Sanjole is a leader in wireless test and measurement solutions for protocol decoding and interoperability.

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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 the estimated fair values of the assets acquired and liabilities assumed. Goodwill for the acquisitions was assigned to the Communications Solutions Group.

Goodwill is assessed for impairment on a reporting unit basis at least annually in the fourth quarter of each year, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The company has not identified any triggering events that indicate an impairment of goodwill for the ~~three~~nine months ended ~~January~~July 31, 2021.

During the ~~three~~nine months ended ~~January~~July 31, 2021, other intangible assets increased $3$4 million due to the impact of foreign exchange translation. Amortization of other intangible assets was ~~$58~~$33 million and ~~$55~~$147 million for the three and nine months ended ~~January~~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. ~~During the three months ended January 31, 2021, we transferred $1 million from in-process R&D to developed technology as projects were successfully completed.~~

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


		Amortization expense			Amortization expense
		(in millions)			(in millions)
2021 (remainder)	2021 (remainder)	$	114	2021 (remainder)	$	26
2022	2022	$	95	2022	$	96
2023	2023	$	72	2023	$	74
2024	2024	$	32	2024	$	34
2025	2025	$	16	2025	$	17
Thereafter	Thereafter	$	19	Thereafter	$	29

9.7. 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.

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

Financial assets and liabilities measured at fair value on a recurring basis as of ~~January~~July 31, 2021 and October 31, 2020 were as follows:


		Fair Value Measurements at																					Fair Value Measurements at
		January 31, 2021										October 31, 2020											July 31, 2021										October 31, 2020
		Total		Level 1		Level 2		Level 3		Other		Total		Level 1		Level 2		Level 3		Other			Total		Level 1		Level 2		Level 3		Other		Total		Level 1		Level 2		Level 3		Other
		(in millions)																					(in millions)
Assets:	Assets:																					Assets:
Short-term	Short-term																					Short-term
Cash equivalents	Cash equivalents																					Cash equivalents
Money market funds	Money market funds	$	1,121	$	1,121	$	0	$	0	$	—	$	1,047	$	1,047	$	0	$	0	$	—	Money market funds	$	1,402	$	1,402	$	—	$	—	$	—	$	1,047	$	1,047	$	—	$	—	$	—
Derivative instruments (foreign exchange contracts)	Derivative instruments (foreign exchange contracts)	6		0		6		0		—		3		0		3		0		—		Derivative instruments (foreign exchange contracts)	3		—		3		—		—		3		—		3		—		—
Long-term	Long-term																					Long-term
Derivative instruments (interest rate swaps)	Derivative instruments (interest rate swaps)	43		0		43		0		—		23		0		23		0		—		Derivative instruments (interest rate swaps)	42		—		42		—		—		23		—		23		—		—
Equity investments	Equity investments	52		52		0		0		—		52		52		0		0		—		Equity investments	58		58		—		—		—		52		52		—		—		—
Equity investments - other	Equity investments - other	10		0		0		0		10		9		0		0		0		9		Equity investments - other	10		—		—		—		10		9		—		—		—		9
Total assets measured at fair value	Total assets measured at fair value	$	1,232	$	1,173	$	49	$	0	$	10	$	1,134	$	1,099	$	26	$	0	$	9	Total assets measured at fair value	$	1,515	$	1,460	$	45	$	—	$	10	$	1,134	$	1,099	$	26	$	—	$	9
Liabilities:	Liabilities:																					Liabilities:
Short-term	Short-term																					Short-term
Derivative instruments (foreign exchange contracts)	Derivative instruments (foreign exchange contracts)	$	4	$	0	$	4	$	0	$	—	$	4	$	0	$	4	$	0	$	—	Derivative instruments (foreign exchange contracts)	$	3	$	—	$	3	$	—	$	—	$	4	$	—	$	4	$	—	$	—
Long-term	Long-term																					Long-term
Deferred compensation liability	Deferred compensation liability	20		0		20		0		—		18		0		18		0		—		Deferred compensation liability	24		—		24		—		—		18		—		18		—		—
Total liabilities measured at fair value	Total liabilities measured at fair value	$	24	$	0	$	24	$	0	$	—	$	22	$	0	$	22	$	0	$	—	Total liabilities measured at fair value	$	27	$	—	$	27	$	—	$	—	$	22	$	—	$	22	$	—	$	—

Net ~~realized~~unrealized gains ~~(losses)~~ on ~~sale of~~ our equity investments were ~~0 for both the three months ended January 31, 2021 and 2020. Net unrealized losses on our equity investments still held were $2~~$1 million and 0$3 million for the three months ended ~~January~~July 31, 2021 and 2020, respectively. Net unrealized gains on our equity investments were $2 million and $13 million for the nine months ended July 31, 2021 and 2020, respectively.

~~Our money market funds and equity investments with readily determinable fair values are measured at fair value using quoted market prices and, therefore, are classified within Level 1~~

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).

~~10.~~8. DERIVATIVES

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

Cash Flow Hedges

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

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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 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.

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.

The number of open foreign exchange forward contracts designated as "cash flow hedges" and "not designated as hedging instruments" was ~~190~~207 and ~~98,~~73, respectively, as of ~~January~~July 31, 2021. The aggregated notional amounts by currency and designation as of ~~January~~July 31, 2021 were as follows:


		Derivatives in Cash Flow Hedging Relationships		Derivatives Not Designated as Hedging Instruments			Derivatives in Cash Flow Hedging Relationships	Derivatives Not Designated as Hedging Instruments
		Forward Contracts			Forward Contracts					Forward Contracts		Forward Contracts
Currency	Currency	Buy/(Sell)			Buy/(Sell)				Currency	Buy/(Sell)		Buy/(Sell)
		(in millions)					(in millions)
Euro	Euro	$	21		$	33			Euro	$	19	$	46
British Pound	British Pound	0			(122)				British Pound	17		(108)
Singapore Dollar	Singapore Dollar	17			13				Singapore Dollar	23		12

Malaysian Ringgit	Malaysian Ringgit	82			13				Malaysian Ringgit	93		10
Japanese Yen	Japanese Yen	(76)			(84)				Japanese Yen	(101)		(42)
Other currencies	Other currencies	9			(7)				Other currencies	10		(11)
Total	Total	$	53		$	(154)			Total	$	61	$	(93)

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


Fair Values of Derivative Instruments	Fair Values of Derivative Instruments										Fair Values of Derivative Instruments
Assets Derivatives	Assets Derivatives					Liabilities Derivatives					Assets Derivatives					Liabilities Derivatives
		Fair Value					Fair Value					Fair Value					Fair Value
Balance Sheet Location	Balance Sheet Location	January 31, 2021		October 31, 2020		Balance Sheet Location	January 31, 2021		October 31, 2020		Balance Sheet Location	July 31, 2021		October 31, 2020		Balance Sheet Location	July 31, 2021		October 31, 2020
(in millions)	(in millions)										(in millions)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:										Derivatives designated as hedging instruments:
Cash flow hedges	Cash flow hedges										Cash flow hedges
Foreign exchange contracts	Foreign exchange contracts										Foreign exchange contracts
Other current assets	Other current assets	$	5	$	2	Other accrued liabilities	$	2	$	3	Other current assets	$	3	$	2	Other accrued liabilities	$	1	$	3
Interest rate swap contracts:	Interest rate swap contracts:										Interest rate swap contracts:
Other assets	Other assets	43		23		Other long-term liabilities	0		0		Other assets	42		23

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Foreign exchange contracts	Foreign exchange contracts										Foreign exchange contracts
Other current assets	Other current assets	1		1		Other accrued liabilities	2		1		Other current assets	—		1		Other accrued liabilities	2		1
Total derivatives	Total derivatives	$	49	$	26		$	4	$	4	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:

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		Three Months Ended			Three Months Ended						Nine Months Ended
		January 31,			July 31,						July 31,
			2021			2020			2021		2020		2021		2020
			(in millions)						(in millions)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:							Derivatives designated as hedging instruments:
Cash Flow Hedges	Cash Flow Hedges							Cash Flow Hedges
Interest rate swap contracts:	Interest rate swap contracts:							Interest rate swap contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)	Gain (loss) recognized in accumulated other comprehensive income (loss)		$	21		$	0	Gain (loss) recognized in accumulated other comprehensive income (loss)	$	(29)	$	(3)	$	19	$	(7)
Foreign exchange contracts:	Foreign exchange contracts:							Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income (loss)	Gain (loss) recognized in accumulated other comprehensive income (loss)		$	2		$	2	Gain (loss) recognized in accumulated other comprehensive income (loss)	$	—	$	3	$	3	$	(2)
Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings:	Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings:							Gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings:
Cost of products	Cost of products		$	(1)		$	(1)	Cost of products	$	1	$	(1)	$	(1)	$	(2)
Selling, general and administrative	Selling, general and administrative		$	1		$	0	Selling, general and administrative	$	—	$	—	$	2	$	(1)
Gain (loss) excluded from effectiveness testing recognized in earnings based on changes in fair value:
Gain excluded from effectiveness testing recognized in earnings based on changes in fair value:								Gain excluded from effectiveness testing recognized in earnings based on changes in fair value:			—
Cost of products	Cost of products		$	0		$	1	Cost of products	$	—	$	—	$	—	$	2

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

Selling, general and administrative								Selling, general and administrative	$	1	$	—	$	1	$	—
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Gain (loss) recognized in:	Gain (loss) recognized in:							Gain (loss) recognized in:
Cost of products	Cost of products		$	1		$	0	Cost of products	$	—	$	—	$	1	$	—
Other income (expense), net	Other income (expense), net		$	(4)		$	0	Other income (expense), net	$	(2)	$	1	$	(5)	$	4

The estimated amount at ~~January~~July 31, 2021 expected to be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months is ~~a gain of $1 million.~~zero.

~~11. RETIREMENT PLANS AND POST-RETIREMENT BENEFIT PLANS~~

~~For the three months ended January 31, 2021 and 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
January 31,
2021 2020 2021 2020 2021 2020
(in millions)
Service cost—benefits earned during the period $ 6 $ 6 $ 4 $ 4 $ 0 $ 0
Interest cost on benefit obligation 5 6 4 4 1 1
Expected return on plan assets (13) (11) (20) (21) (3) (3)
Amortization:
Net actuarial loss 6 4 10 8 3 3
Prior service credit 0 0 0 0 0 (3)
Net periodic benefit cost (benefit) $ 4 $ 5 $ (2) $ (5) $ 1 $ (2)

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

We did 0t contribute to our U.S. defined benefit plans or U.S. post-retirement benefit plan during the three months ended January 31, 2021 and 2020. We contributed $3 million and $2 million to our non-U.S. defined benefit plans during the three months ended January 31, 2021 and 2020, respectively.

For the remainder of 2021, we are evaluating potential contributions to our U.S. Defined Benefit Plan or U.S. Post-Retirement Benefit Plan, although contributions are not required, and we expect to contribute $6 million to our non-U.S. defined benefit plans.

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~~12.~~9. LEASES

We have operating leases for items including office space, order fulfillment, sales and service centers, R&D and certain equipment, primarily automobiles. ~~Our~~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 ~~8.2~~8.4 years and ~~6.3~~7.4 years as of ~~January~~July 31, 2021 and 2020, respectively. The weighted average discount rate of our operating leases was ~~3% for both January~~3 percent as of July 31, 2021 and 2020.

The following table summarizes the components of our lease cost:


		Three Months Ended					Three Months Ended				Nine Months Ended
		January 31,					July 31,				July 31,
		2021		2020			2021		2020		2021		2020
		(in millions)					(in millions)				(in millions)
Operating lease cost	Operating lease cost	$	13	$	11	Operating lease cost	$	13	$	13	$	39	$	36
Variable lease cost	Variable lease cost	$	5	$	4	Variable lease cost	$	4	$	4	$	11	$	12

~~Costs associated with our short-term leases~~Short-term lease costs, sublease income and finance lease costs were immaterial for ~~both~~ the three and nine months ended ~~January~~July 31, 2021 and 2020. Sublease income was immaterial for both the three months ended January 31, 2021 and 2020. Amounts related to finance lease activities for the three months ended January 31, 2021 and 2020 were not material.

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

Three Months Ended
January 31,
2021 2020
(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows $ 13 $ 11
ROU assets obtained in exchange for operating lease obligations $ 41 $ 12

~~The increase in ROU assets was primarily driven by reassessment of a lease term triggered by significant leasehold improvements.~~


	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 ~~January~~July 31, 2021 with initial terms exceeding one year ~~are~~were as follows:


		Operating Leases			Operating Leases
		(in millions)			(in millions)
2021 (remainder)	2021 (remainder)	$	38	2021 (remainder)	$	13
2022	2022	43		2022	43
2023	2023	33		2023	36
2024	2024	24		2024	29
2025	2025	19		2025	23
Thereafter	Thereafter	100		Thereafter	123
Total undiscounted lease liability	Total undiscounted lease liability	257		Total undiscounted lease liability	267
Imputed interest	Imputed interest	31		Imputed interest	30
Total discounted lease liability	Total discounted lease liability	$	226	Total discounted lease liability	$	237

Leases That Have Not Yet Commenced

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

Lessor Disclosure

Rental income from leasing out excess facilities ~~was $3 million~~ for both the three and nine months ended ~~January~~July 31, 2021 and July 31, 2020 was $2 million and $8 million, respectively, and is included in ~~other~~"other operating expense (income), ~~net.~~net" in the condensed consolidated statement of operations. Other lessor arrangements were immaterial.

~~13. WARRANTIES, COMMITMENTS AND CONTINGENCIES~~

~~Standard warranty~~

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warranty charges. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. Estimated warranty charges are recorded within cost of products at the time related product revenue is recognized.

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

Three Months Ended
January 31,
2021 2020
(in millions)
Beginning balance $ 33 $ 38
Accruals for warranties, including change in estimates 9 5
Settlements made during the period (7) (8)
Ending balance $ 35 $ 35
Accruals for warranties due within one year $ 21 $ 22
Accruals for warranties due after one year 14 13
Ending balance $ 35 $ 35

~~Commitments~~

~~During the three months ended January 31, 2021, there were no material changes to our contractual commitments reported in the company’s 2020 Annual Report on Form 10-K.~~

~~Contingencies~~

We are involved in lawsuits, claims, investigations and proceedings, including, but not limited to, patent, commercial and environmental matters, which arise in the ordinary course of business. There are no matters pending that we currently believe probable and reasonably possible of having a material impact to our business, consolidated financial position, results of operations or cash flows.

~~14.~~10. DEBT

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


		January 31, 2021		October 31, 2020			July 31, 2021		October 31, 2020
		(in millions)					(in millions)
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of $2 and $2)		$	598	$	598
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of $1 and $2)						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)	2027 Senior Notes at 4.60% ($700 face amount less unamortized costs of $4 and $5)	696		695		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)	2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $4 and $4)	496		496		2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $4 and $4)	496		496
Total debt	Total debt	$	1,790	$	1,789	Total debt	$	1,791	$	1,789

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Short-Term Debt

Revolving Credit Facility

~~We maintain~~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 ~~provides for a $450 million, five-year unsecured revolving credit facility that~~ will expire on ~~February 15, 2022.~~July 30, 2026 and bears interest at an annual rate of LIBOR + 1.125 percent. In addition, the ~~Revolving Credit Facility~~new credit agreement permits usthe company, subject to certain customary conditions, on one or more occasions to request to increase the total commitments under ~~this credit facility~~the Revolving Credit Facility by up to ~~$150~~$250 million ~~(to a total of $600 million)~~ in the ~~aggregate on one or more occasions upon request.~~aggregate. We may use amounts borrowed under the facility for general corporate purposes. As of ~~January~~July 31, 2021, ~~and October 31, 2020,~~ we had 0 borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the ~~three~~nine months ended ~~January~~July 31, ~~2021.~~2021.

Long-Term Debt

There have been no changes to the principal, maturity, interest rates and interest payment terms of the senior notes during the ~~three~~nine months ended ~~January~~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 ~~January~~July 31, 2021 and October 31, 2020, we had ~~$42~~$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 ~~$267~~$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, 2021 and 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
	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)

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

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 or U.S. 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, respectively.

For the remainder of 2021, we do not expect to contribute to our U.S. defined benefit plan and U.S. post-retirement benefit plan, and we expect to contribute $2 million to our non-U.S. defined benefit plans.

12. SUPPLEMENTAL FINANCIAL INFORMATION

The following tables provide details of selected balance sheet items:

Cash, cash equivalents, and 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 non-U.S. defined benefit pension plans and deposits held as collateral against bank guarantees.

Inventory


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

Standard warranty

Our warranties on products sold through direct sales channels are primarily for one year. Warranties for products sold through distribution channels are primarily for three years. We accrue for standard warranty costs based on historical trends in warranty charges. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. Estimated warranty charges are recorded within cost of products at the time related product revenue is recognized.

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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

13. COMMITMENTS AND CONTINGENCIES

Commitments

Our contractual obligations for commitments to contract manufacturers and suppliers increased to $465 million as of ~~January~~July 31, 2021 ~~and~~from $349 million as of October 31, 2020, ~~respectively. The increase in fair value is~~driven by higher revenue and advance purchase orders to secure capacity for critical parts due to ~~lower corporate credit spreads, partially offset by an increase~~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, 2021, there were no other material changes to our contractual commitments as reported in ~~U.S. Treasury yields.~~our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.

Contingencies

On August 3, 2021, we entered into a Consent Agreement with the Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, Department of State to resolve alleged violations of the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR). Pursuant 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 and environmental matters, which arise in the ordinary course of business. Although there are no matters pending that we currently believe are probable and reasonably possible of having a material impact to our business, consolidated financial position, results of operations or cash 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.

~~15.~~14. STOCKHOLDERS' EQUITY

Stock Repurchase Program

On November 18, 2020, our board of directors approved a new stock repurchase program authorizing the purchase of up to $750 million of the company’s common stock. ~~Our previously approved 2019 stock repurchase program authorizing the purchase of up to $500 million of the company’s common stock was nearly exhausted.~~

Under our stock repurchase program, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. All such shares and related costs are held as treasury stock and accounted for at trade date using the cost method. The stock repurchase program may be commenced, suspended or discontinued at any time at the company’s discretion and does not have an expiration date.

For the ~~three~~nine months ended ~~January~~July 31, 2021, we repurchased ~~137,200~~2,297,600 shares of common stock for ~~$20 million~~.$320 million. For the ~~three~~nine months ended ~~January~~July 31, 2020, we repurchased ~~731,918~~2,047,166 shares of common stock for ~~$75~~$195 million.

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Accumulated Other Comprehensive Loss

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


		Foreign currency translation			Net defined benefit pension cost and post retirement plan costs					Unrealized gains (losses) on derivatives		Total						Foreign currency translation				Net defined benefit pension cost and post retirement plan costs								Unrealized gains (losses) on derivatives				Total
				Actuarial losses			Prior service credits									Actuarial losses						Prior service credits
																		(in millions)
As of April 30, 2021														As of April 30, 2021				$	7			$	(569)			$	(5)			$	56			$	(511)
Other comprehensive income (loss) before reclassifications														Other comprehensive income (loss) before reclassifications				(7)				—				—				(29)				(36)
Amounts reclassified out of accumulated other comprehensive gain (loss)														Amounts reclassified out of accumulated other comprehensive gain (loss)				—				19				—				(1)				18
Tax benefit (expense)														Tax benefit (expense)				—				(6)				—				7				1
Other comprehensive income (loss)														Other comprehensive income (loss)				(7)				13				—				(23)				(17)
As of July 31, 2021														As of July 31, 2021				$	—			$	(556)			$	(5)			$	33			$	(528)
				(in millions)
As of October 31, 2020	As of October 31, 2020	$	(10)		$	(600)		$	(5)	$	16			$	(599)		As of October 31, 2020			$	(10)			$	(600)			$	(5)			$	16			$	(599)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	31			0			0		23		54		Other comprehensive income (loss) before reclassifications				10				(14)				—				22				18
Amounts reclassified out of accumulated other comprehensive gain (loss)	Amounts reclassified out of accumulated other comprehensive gain (loss)	0			19			0		0		19		Amounts reclassified out of accumulated other comprehensive gain (loss)				—				74				—				(1)				73
Tax benefit (expense)	Tax benefit (expense)	0			(5)			0		(5)		(10)		Tax benefit (expense)				—				(16)				—				(4)				(20)
Other comprehensive income (loss)	Other comprehensive income (loss)	31			14			0		18		63		Other comprehensive income (loss)				10				44				—				17				71
As of January 31, 2021		$	21		$	(586)		$	(5)	$	34	$	(536)
As of July 31, 2021														As of July 31, 2021				$	—			$	(556)			$	(5)			$	33			$	(528)

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

As of October 31, 2019	As of October 31, 2019	$	(43)		$	(536)		$	4	$	(3)	$	(578)	As of October 31, 2019				$	(43)			$	(536)			$	4			$	(3)			$	(578)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	0			0			0		2		2		Other comprehensive income (loss) before reclassifications				30				—				—				(9)				21
Amounts reclassified out of accumulated other comprehensive gain (loss)	Amounts reclassified out of accumulated other comprehensive gain (loss)	0			17			(3)		1		15		Amounts reclassified out of accumulated other comprehensive gain (loss)				—				47				(9)				3				41
Tax benefit (expense)	Tax benefit (expense)	0			0			1		(1)		0		Tax benefit (expense)				—				(8)				2				2				(4)
Other comprehensive income (loss)	Other comprehensive income (loss)	0			17			(2)		2		17		Other comprehensive income (loss)				30				39				(7)				(4)				58
As of January 31, 2020		$	(43)		$	(519)		$	2	$	(1)	$	(561)
As of July 31, 2020														As of July 31, 2020				$	(13)			$	(497)			$	(3)			$	(7)			$	(520)

2021

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


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		Details about accumulated other comprehensive loss components			Amounts reclassified from other comprehensive loss					Affected line item in statement of operations
		Three Months Ended								Three Months Ended	Nine Months Ended
		January 31,								July 31,	July 31,
			2021		2020						2021		2020		2021		2020
			(in millions)								(in millions)				(in millions)
Unrealized gain (loss) on derivatives	Unrealized gain (loss) on derivatives		$	(1)	$	(1)		Cost of products	Unrealized gain (loss) on derivatives		$	1	$	(1)	$	(1)	$	(2)	Cost of products
			1		0			Selling, general and administrative			—		—		2		(1)		Selling, general and administrative
			0		0			Benefit (provision) for income tax			—		—		—		—		Benefit (provision) for income tax
			0		(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:								Net defined benefit pension cost and post retirement plan costs:
Net actuarial loss	Net actuarial loss		(19)		(17)				Net actuarial loss		(19)		(15)		(74)		(47)
Prior service credits	Prior service credits		0		3				Prior service credits		—		3		—		9
			(19)		(14)			Total before income tax			(19)		(12)		(74)		(38)		Total before income tax
			5		(1)			Benefit (provision) for income tax			5		3		19		6		Benefit (provision) for income tax
			(14)		(15)			Net of income tax			(14)		(9)		(55)		(32)		Net of income tax

Total reclassifications for the period	Total reclassifications for the period		$	(14)	$	(16)			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 11, "Retirement Plans and Post-Retirement Benefit Plans").

~~16.~~15. SEGMENT INFORMATION

We report our results in ~~two~~2 reportable ~~segments consisting of~~segments: Communications Solutions Group ("CSG") and Electronic Industrial Solutions ~~Group.~~

~~Descriptions of our 2 reportable segments are as follows:~~

T~~he Communications Solutions~~ Group ~~serves customers spanning the worldwide commercial communications and aerospace, defense, and government end markets.~~("EISG"). The group’s solutions consist of electronic design and test software, electronic measurement instruments, systems and related services. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of electronic equipment and networks.

The 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 and measurement solutions for consumer electronics, education, general electronics design and manufacturing, and semiconductor design and manufacturing. The group provides 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. With the acquisition of Eggplant, a leading software test automation company, we now have the ability to provide automated software test capabilities that include artificial intelligence (AI) and machine learning to automatically identify, build and execute tests critical to digital business success and a strong customer experience.

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~~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.

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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, a gain on an insurance settlement related to northern California 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			Three Months Ended
		(in millions)							July 31,
Three months ended January 31, 2021:
									2021						2020
									CSG		EISG		Total		CSG		EISG		Total
									(in millions)

Revenue	Revenue	$	852	$	328	$	1,180	Revenue	$	875	$	371	$	1,246	$	760	$	251	$	1,011
Segment income from operations	Segment income from operations	$	224	$	96	$	320	Segment income from operations	$	224	$	115	$	339	$	197	$	67	$	264

Three months ended January 31, 2020:
Revenue		$	818	$	277	$	1,095
Segment income from operations		$	201	$	73	$	274


	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				Three Months Ended				Nine Months Ended
		January 31,				July 31,				July 31,
		2021		2020				2021		2020		2021		2020
		(in millions)						(in millions)
Total reportable operating segments' income from operations	Total reportable operating segments' income from operations	$	320	$	274		Total reportable operating segments' income from operations	$	339	$	264	$	979	$	711
Share-based compensation	Share-based compensation	(43)		(39)			Share-based compensation	(19)		(19)		(84)		(73)
Amortization of acquisition-related balances	Amortization of acquisition-related balances	(58)		(59)			Amortization of acquisition-related balances	(33)		(54)		(147)		(167)
Acquisition and integration costs	Acquisition and integration costs	(3)		(2)			Acquisition and integration costs	(2)		(8)		(8)		(12)
Gain on insurance settlement	Gain on insurance settlement	0		32			Gain on insurance settlement	—		—		—		32
Restructuring and other	Restructuring and other	(4)		(3)			Restructuring and other	(1)		(1)		(9)		(4)
Income from operations, as reported	Income from operations, as reported	212		203			Income from operations, as reported	284		182		731		487
Interest income	Interest income	1		6			Interest income	1		1		2		11
Interest expense	Interest expense	(20)		(19)			Interest expense	(20)		(20)		(59)		(59)
Other income (expense), net	Other income (expense), net	2		12			Other income (expense), net	5		22		(1)		56
Income before taxes, as reported	Income before taxes, as reported	$	195	$	202		Income before taxes, as reported	$	270	$	185	$	673	$	495

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"), impacts to the supply chain, the impact of volatile weather caused by environmental conditions such as climate change, and our and the combined group's estimated or anticipated future results of operations, 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.

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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 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 R&D and have focused our development efforts on strategic opportunities to capture future growth.

COVID-19 pandemic

~~In March 2020,~~Our global operations have been and continue to be affected by the ~~World Health Organization declared COVID-19 as~~ongoing global pandemic of a ~~global pandemic. In response~~novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the U.S. and international markets. During the nine months ended July 31, 2021, governments in many countries, including the United States, continued 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. ~~Our employees, customers, suppliers and vendors have been subject to these restrictions and orders and have been similarly impacted.~~ Working with local governments and health officials to implement health and safety measures at all of our locations, we have re-opened most sites worldwide and significantly ramped our production and services operations. ~~All of our essential production facilities around the world were open during the first fiscal quarter, and as of the date of this Form 10-Q.~~

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 ~~January~~July 31, 2021 and 2020

We realized the most notable impacts of the COVID-19 virus control measures in the last half of the second quarter and continuing into the third quarter of fiscal 2020, with sequential improvement each quarter thereafter. During the three and nine months ended July, 31, 2020, 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 ~~January~~July 31, 2021 were ~~$1,223~~$1,310 million and $3,865 million, respectively, an increase of 723 percent ~~when~~and 17 percent compared to the same ~~period~~periods last year. Orders associated with acquisitions ~~and foreign currency movements each~~ had a favorable impact of 1 percent on the year-over-year order ~~growth. Orders increased~~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, more significantly in Asia Pacific.~~regions.

Revenue for the three and nine months ended ~~January~~July 31, 2021 was ~~$1,180~~$1,246 million and $3,647 million, respectively, an increase of 823 percent ~~when~~and 22 percent compared to the same ~~period~~periods last year. Revenue associated with acquisitions ~~and foreign currency movements each~~ had a favorable impact of 1 percent on the year-over-year revenue ~~growth. 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~~year-over-year driven by strength in ~~aerospace, defense and government, semiconductor measurement and general electronics measurement, partially offset by a decline in commercial communications.~~all markets. Revenue from the Communications Solutions Group and Electronic Industrial Solutions Group represented 7270 percent and 2830 percent, respectively, of total revenue for the ~~current period.~~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 ~~January~~July 31, 2021 was ~~$172~~$254 million and $612 million, respectively, compared to ~~$163~~$176 million and $410 million for the same ~~period~~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 amortization of acquisition-related balances, partially offset by 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 income tax expense, partially offset by ~~unfavorable mix and~~an increase in variable people-related costs, higher R&D investment, lower operating income due to a one-time prior-period gain related to an insurance ~~settlement.~~settlement, a loss on a partial settlement of our Netherlands defined benefit plan, incremental costs of acquired businesses and the changes in 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 ~~COVID-19 outbreak. We have complied and will continue to comply with recent U.S. Department of Commerce export control regulations.~~global semiconductor chip shortage. We remain confident in our long-term secular market growth trends and the strength of our operating model.

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Critical Accounting Policies and Estimates

There were no material changes during the three and nine months ended ~~January~~July 31, 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, 2020.

Adoption of New Accounting Pronouncements

Accounting standard updates induring the ~~first quarter of fiscal~~three and nine months ended July 31, 2021 that have been issued by the Financial Accounting Standards Board ~~(“FASB”)~~ or other standards-setting bodies are not material to our condensed consolidated financial statements.

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 rolling period of up to twelve months. Therefore, we are exposed to currency fluctuations over the longer term. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

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

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


			Three Months Ended					Year over Year Change	Three Months Ended						Nine Months Ended				Year over Year Change
			January 31,					Three	July 31,						July 31,				Three		Nine
				2021		2020				Months		2021			2020		2021		2020		Months	Months
		(in millions)												(in millions)
Revenue:	Revenue:										Revenue:
Products	Products			$	970	$	902			7%	Products	$	1,021		$	813	$	2,987	$	2,423	26%	23%
Services and other	Services and other			210		193				9%	Services and other	225			198		660		578		14%	14%
Total revenue	Total revenue			$	1,180	$	1,095			8%	Total revenue	$	1,246		$	1,011	$	3,647	$	3,001	23%	22%

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


			Year over Year Change						Year over Year Change
		Three Months Ended			Three Months Ended					Nine Months Ended
		January 31, 2021			July 31, 2021					July 31, 2021
Geographic Region	Geographic Region		Actual			Currency Adjusted		Geographic Region	Actual	Currency Adjusted	Actual	Currency Adjusted
Americas	Americas		5	%		5	%	Americas	37%	37%	27%	27%
Europe	Europe		8	%		5	%	Europe	27%	21%	23%	18%
Asia Pacific	Asia Pacific		10	%		9	%	Asia Pacific	12%	11%	17%	15%
Total revenue	Total revenue		8	%		7	%	Total revenue	23%	22%	22%	20%

~~Revenue~~For the three and nine months ended July 31, 2021, revenue grew across all ~~regions, including double-digit growth in Asia Pacific. Currency~~regions. On a geographical basis, foreign currency movements had a favorable impact of 6 percentage points and 5 percentage points, respectively on revenue ~~of 3 percentage points~~ in Europe for the three and nine months ended July 31, 2021 and a favorable impact of 1 percentage point and 2 percentage points, respectively, on revenue in Asia Pacific for the three and nine months ended ~~January~~July 31, 2021.

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Costs and Expenses


		Three Months Ended						Year over Year Change	Three Months Ended						Nine Months Ended						Year over Year Change
		January 31,						Three	July 31,						July 31,						Three			Nine
			2021		2020					Months		2021			2020			2021			2020			Months	Months
Total gross margin	Total gross margin		59.9%		59.8		%			—	Total gross margin	63.2		%	59.9		%	61.2		%	59.2		%	3 ppts	2 ppts
Operating margin	Operating margin		18.0%		18.5		%			(1) ppt	Operating margin	22.7		%	18.0		%	20.0		%	16.2		%	5 ppts	4 ppts

in millions	in millions										in millions
Research and development	Research and development		$	199	$	187				7%	Research and development	$	207		$	169		$	615		$	522		23%	18%
Selling, general and administrative	Selling, general and administrative		$	301	$	300				—	Selling, general and administrative	$	302		$	259		$	900		$	810		17%	11%
Other operating expense (income), net	Other operating expense (income), net		$	(5)	$	(35)				(85)%	Other operating expense (income), net	$	(5)		$	(4)		$	(14)		$	(42)		11%	(66)%

Gross margin for the three months ended ~~January 31, 2021 was flat compared to the same period last year, as the favorable impact from higher revenue volume was offset by unfavorable mix and higher warranty costs.~~

~~R&D expense for the three months ended January~~July 31, 2021 increased ~~7 percent~~3 percentage points compared to the same period last year, primarily driven by lower amortization of acquisition-related balances, higher revenue volume 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 and lower amortization of acquisition-related balances, partially offset by higher variable people-related costs.

R&D expense for the three and nine months ended July 31, 2021 increased 23 percent and 18 percent, respectively, compared to the same periods last year, primarily driven by greater ~~investment~~investments in key growth opportunities in our end markets and leading-edge technologies, increases in variable people-related and incremental costs of an acquired ~~business and higher infrastructure-related costs, partially offset by declines in discretionary spending due to COVID-19 related restrictions and people-related costs.~~businesses. As a percentage of revenue, R&D expense was 17 percent for both the three and nine months ended ~~January~~July 31, 2021 and ~~2020.~~2020, respectively.

Selling, general and administrative expense for the three months ended ~~January~~July 31, 2021 ~~was flat~~increased 17 percent compared to the same period last year, asprimarily driven by increases in variable people-related costs and infrastructure-related costs and incremental costs of an acquired ~~business, higher~~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 ~~higher~~ infrastructure-related costs ~~were~~and incremental costs of acquired businesses, partially offset by reductions in travel and marketing-related costs due to COVID-19 related restrictions.

Other operating expense (income), net for the three and nine months ended ~~January~~July 31, 2021 was income of $5 million and $14 million, respectively, compared to income of ~~$35~~$4 million and $42 million for the ~~three~~same periods last year. Other operating expense (income), net for the nine months ended ~~January~~July 31, 2020 ~~which~~ included a one-time gain of $32 million on an insurance settlement.

Operating margin ~~decreased 1 percentage point~~ for the three months ended ~~January~~July 31, 2021 increased 5 percentage points compared to the same period last year, primarily driven by ~~unfavorable mix~~gross margin gains and lower operating expenses as a percentage of sales. Operating margin for the nine months ended July 31, 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~~related to an insurance ~~settlement , partially offset by favorable impact from flat selling, general and administration expenses and higher revenue volume.~~settlement.

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As of ~~January~~July 31, 2021, our headcount was approximately ~~14,000~~14,100 compared to approximately ~~13,600~~13,800 at ~~January~~July 31, 2020. ~~The increase in headcount was primarily driven by acquisitions.~~

Interest Income and Expense

Interest income for the three and nine months ended ~~January~~July 31, 2021 ~~and 2020~~ was $1 million and $6$2 million, respectively, as compared to $1 million and $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 ~~January~~July 31, 2021 and 2020 was $20 million and ~~$19~~$59 million, respectively, and primarily relates to interest on our senior notes.

Other income (expense), net

Other income (expense), net for the three and nine months ended ~~January~~July 31, 2021 ~~and 2020~~ was income of $2$5 million and ~~$12~~expense of $1 million, respectively, compared to income of $22 million and $56 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) and~~ the change in fair value of our equity ~~investments.~~investments and gain from insurance proceeds. 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 includes a one-time gain from insurance proceeds.

Income Taxes

The ~~company’s effective~~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		%

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~~$0.08~~ $0.15 for the ~~three~~nine months ended ~~January~~July 31, 2021 and 2020, respectively. The Singapore tax incentive is due for renewal in ~~2024. The~~2024, and the Malaysia incentive ~~in Malaysia~~ is due for renewal in 2025.

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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 January 31, 2021, our estimated annual effective tax rate for fiscal year 2021 is an expense of 16.9 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

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.

Revenue

Three Months Ended Year over Year Change
January 31, Three
2021 2020 Months
(in millions)
Total revenue $ 852 $ 818 4%


	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 ~~January~~July 31, 2021 increased 415 percent and 17 percent, respectively, when compared to the same ~~period~~periods last year. Revenue grew in both the aerospace, defense and government and the commercial communications markets. Foreign currency movements had a favorable impact of 1 percent on year-over-year revenue growth for both the three and nine months ended July 31, 2021. Revenue associated with acquisitions had a favorable impact onof 1 percent for the ~~year-over-year~~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. Revenue~~ growth in the ~~aerospace, defense~~Americas and ~~government market~~Europe was partially offset by a decline in Asia Pacific. For the ~~commercial communications market. Revenue~~nine months ended July 31, 2021, revenue grew across all ~~regions~~regions.

The commercial communications market revenue for the three and nine months ended ~~January~~July 31, ~~2021.~~

~~Revenue from the commercial communications market~~2021 increased 6 percent and 10 percent year-over-year, respectively, and represented 6568 percent of the total Communications Solutions Group revenue for both the ~~current period and declined 3 percent year over year.~~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 ~~January~~July 31, 2021, revenue ~~declines~~growth in ~~Asia Pacific and~~ the Americas ~~were~~and Europe was partially offset by ~~an increase~~a decline in ~~Europe. The decline was largely driven by increased China trade restrictions.~~Asia Pacific. For the nine months ended July 31, 2021, revenue grew in the Americas and Europe, while remaining flat in Asia Pacific. We continue to see ~~strength driven by on-going global 5G deployments, the roll-out of new 5G devices, and continued~~ investments in ~~400G~~5G, fueled by the ongoing redesign of every aspect of communications systems, including wireless access, infrastructure, wireline technologies, data centers and ~~800G ethernet for data centers.~~the cloud.

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~~Revenue from the~~The aerospace, defense and government market revenue for the three and nine months ended July 31, 2021 increased 39 percent and 34 percent year-over-year, respectively, and represented 3532 percent of the total Communications Solutions Group revenue for both the ~~three months ended January 31, 2021, and increased 20 percent year over year.~~periods. For the three and nine months ended ~~January~~July 31, 2021, revenue ~~increased~~grew across all regions. ~~Revenue~~The strong revenue growth was ~~mainly~~ driven by increased customer demand and continued investment in space, satellite, electromagnetic spectrum operations, ~~space,~~ and new commercial technologies like 5G and early 6G research. The aerospace, defense and government market remained strong in the U.S. with increased year-end spending on major defense and government programs, complemented by growth in China and Europe.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 ~~January~~July 31, 2021 ~~versus~~as compared to the ~~three months ended January 31, 2020.~~same periods last year.


		Three Months Ended							Year over Year Change	Three Months Ended						Nine Months Ended						Year over Year Change
		January 31,							Three	July 31,						July 31,						Three			Nine
			2021			2020					Months		2021			2020			2021			2020			Months	Months
Total gross margin	Total gross margin		64.6		%	65.7		%			(1) ppt	Total gross margin	65.7		%	65.2		%	65.0		%	64.8		%	1 ppt	—
Operating margin	Operating margin		26.3		%	24.6		%			2 ppts	Operating margin	25.6		%	25.9		%	25.7		%	23.0		%	—	3 ppts

in millions	in millions											in millions
Research and development	Research and development		$	143		$	139				3%	Research and development	$	151		$	126		$	444		$	388		20%	14%
Selling, general and administrative	Selling, general and administrative		$	188		$	201				(6)%	Selling, general and administrative	$	204		$	176		$	589		$	554		16%	6%
Other operating expense (income), net	Other operating expense (income), net		$	(4)		$	(3)				36%	Other operating expense (income), net	$	(3)		$	(3)		$	(10)		$	(8)		13%	23%
Income from operations	Income from operations		$	224		$	201				11%	Income from operations	$	224		$	197		$	670		$	512		14%	31%

Gross margin for the three months ended ~~January~~July 31, 2021 ~~decreased~~increased 1 percentage point compared to the same period last year, primarily driven by ~~unfavorable mix and~~ higher ~~warranty costs,~~revenue volume, partially offset by higher variable people-related costs. Gross margin for the nine months ended July 31, 2021 was flat compared to the same period last year, as gains driven by higher revenue ~~volume.~~volume were offset by higher variable people-related costs and warranty costs.

R&D expense for the three and nine months ended ~~January~~July 31, 2021 increased 320 percent ~~when~~and 14 percent, respectively, compared to the same ~~period~~periods last year, primarily driven by greater investments in key growth opportunities in our end markets and leading-edge technologies, higher variable people-related costs and higher ~~infrastructure-related costs, partially offset by a decline in travel costs due to COVID-19~~infrastructure related ~~restrictions.~~costs.

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

Other operating expense (income), net for the three and nine months ended July 31, 2021 was income of $4$3 million ~~for the three months ended January 31, 2021~~and $10 million, respectively, compared to income of $3 million and $8 million, respectively, for the same ~~period~~periods last year.

Income from Operations

Income from operations for the three and nine months ended ~~January~~July 31, 2021 increased ~~$23~~$27 million and $158 million, respectively, on a corresponding revenue ~~increase~~increases of ~~$34~~$115 million and $373 million, respectively, compared to the same ~~period~~periods last year.

Operating margin ~~increased 2 percentage points~~ for the three months ended ~~January~~July 31, 2021 was flat compared to the same ~~period~~periods last year, as gains from higher revenue volume were offset by higher operating expenses as a percentage of sales. Operating margin for the nine months ended July 31, 2021 increased 3 percentage points, primarily driven by ~~declines in operating~~higher revenue volume and lower selling, general and administrative expenses as a percentage of sales, partially offset by ~~a decline~~an increase in ~~gross margin as noted above.~~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 group provides electronic measurement instruments, design and test software and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic ~~equipment. With the acquisition of Eggplant, a leading software test automation company, we now have the ability to provide~~equipment, and automated software test ~~capabilities~~ that include artificial intelligence and machine learning to automatically identify, build and execute tests critical to digital business success and a strong customer experience.

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Revenue

Three Months Ended Year over Year Change
January 31, Three
2021 2020 Months
(in millions)
Total revenue $ 328 $ 277 18%


	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 ~~January~~July 31, 2021 increased 1848 percent and 35 percent, respectively, compared to the same ~~period~~periods last ~~year and increased 15 percent excluding the~~year. Revenue associated with acquisitions had a favorable impact of ~~acquisitions.~~2 percent and 3 percent for the three and nine months ended July 31, 2021. Foreign currency movements had a favorable impact of 2 percent on the year-over-year revenue ~~growth. The revenue increase was primarily driven by~~ growth ~~in semiconductor measurement solutions~~for both the three and ~~general electronics measurement due~~nine months ended July 31, 2021. While we continue to ~~continued~~see investments in next-generation semiconductor technologies and ~~continued economic recovery~~growth in general electronics measurement, ~~partially offset by declines~~we also see improved macro conditions in the automotive market and ~~energy.~~increased investment in new mobility technologies. Revenue ~~growth in Asia Pacific~~grew across all regions for both the three and ~~the Americas was partially offset by a slight decline in Europe.~~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 ~~January~~July 31, 2021 ~~versus~~as compared to the ~~three months ended January 31, 2020.~~same periods last year.


		Three Months Ended							Year over Year Change	Three Months Ended						Nine Months Ended						Year over Year Change
		January 31,							Three	July 31,						July 31,						Three			Nine
			2021			2020					Months		2021			2020			2021			2020			Months	Months
Total gross margin	Total gross margin		63.4		%	61.1		%			2 ppts	Total gross margin	63.7		%	62.4		%	63.7		%	61.8		%	1 ppt	2 ppts
Operating margin	Operating margin		29.4		%	26.3		%			3 ppts	Operating margin	31.0		%	26.5		%	29.6		%	25.8		%	5 ppts	4 ppts

in millions	in millions											in millions
Research and development	Research and development		$	48		$	41				18%	Research and development	$	52		$	40		$	153		$	120		29%	28%
Selling, general and administrative	Selling, general and administrative		$	65		$	57				15%	Selling, general and administrative	$	71		$	51		$	206		$	161		38%	28%
Other operating expense (income), net	Other operating expense (income), net		$	(1)		$	(1)				—	Other operating expense (income), net	$	(2)		$	(1)		$	(4)		$	(3)		3%	18%
Income from operations	Income from operations		$	96		$	73				32%	Income from operations	$	115		$	67		$	309		$	199		73%	56%

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

~~R&D expense~~ Gross margin for the ~~three~~nine months ended ~~January~~July 31, 2021 increased ~~18 percent~~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, 2021 increased 29 percent and 28 percent, respectively, compared to the same 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.~~business and higher variable people-related costs.

Selling, general and administrative expense for the three and nine months ended ~~January~~July 31, 2021 increased 1538 percent and 28 percent, respectively, compared to the same ~~period~~periods last year, primarily due to higher selling, infrastructure-related and variable people-related costs and incremental costs of an acquired ~~business and higher selling, marketing and infrastructure-related costs.~~business.

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

Income from Operations

Income from operations for the three and nine months ended ~~January~~July 31, 2021 increased ~~$23~~$48 million and $110 million, respectively, on a corresponding revenue ~~increase~~increases of ~~$51~~$120 million and $273 million, respectively, compared to the same ~~period~~periods last year.

Operating margin for the three and nine months ended ~~January~~July 31, 2021 increased 35 percentage points ~~when~~and 4 percentage points, respectively, compared to the same ~~period~~periods last year, primarily driven by gross margin gains and lower operating expenses as ~~noted above.~~a percentage of sales.

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Financial Condition

Liquidity and Capital Resources

Our ~~financial position as of January 31, 2021 consisted of~~ 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 ~~$1,903~~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 ~~as compared to $1,767 million as~~in the aggregate. We may use amounts borrowed under the facility for general corporate purposes. As of ~~October~~July 31, ~~2020.~~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, 2021.

As of ~~January~~July 31, 2021, approximately ~~$1,346~~$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 of investments in institutional

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money market funds, short-term deposits held at major global financial institutions 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.

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. ~~Given the uncertain duration and severity of the COVID-19 pandemic, we can 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 $295~~increased $276 million ~~for~~during the ~~three~~nine months ended ~~January~~July 31, 2021 compared to ~~$197 million for~~ the same period last year.

•Net income for the ~~three~~nine months ended ~~January~~July 31, 2021 increased $9$202 million compared to the same period last year. Non-cash adjustments to net income were higher by ~~$32~~$16 million due to a one-time prior-period ~~adjustment to reflect a~~gain of $32 million ~~gain from~~related to an insurance recovery of property, plant and equipment reflected as cash from investing activity, a $4$16 million loss on a partial settlement of our Netherlands defined benefit plan, a $11 million increase in ~~each of~~ share-based compensation expense, ~~and depreciation,~~ a $3$11 million increase in ~~amortization~~depreciation and a $6$17 million increase from other miscellaneous non-cash activities, partially offset by a ~~$17~~$56 million increase in deferred tax benefits and a $14 million decrease in ~~deferred tax expense.~~amortization.

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•The aggregate of accounts receivable, inventory and accounts payable used net cash of ~~$34~~$84 million during the first ~~three~~nine months of fiscal 2021 compared to net cash used of ~~$65~~$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 ~~$13~~$113 million during the first ~~three~~nine months of fiscal 2021 compared to net cash ~~used~~provided of ~~$11~~$10 million in the comparable period last ~~year. The increase is~~year, primarily due to higher variable compensation accruals, net of payments, and higher cash inflow from deferred revenue ~~and lower variable compensation payments, partially offset by a decrease in cash from income taxes payable~~ as compared to the same period last year.

•~~We contributed $3 million to our non-U.S. defined benefit plans during the first three months of fiscal 2021 compared to $2 million in the sam~~e period last year. For the remainder of 2021, we expect to contribute $6 million to our non-U.S. defined benefit plans. For the three months ended January 31, 2021, we did not contribute to our U.S. defined benefit plans or U.S. post-retirement benefit plan. For the remainder of 2021, we are evaluating potential contributions to our U.S. Defined Benefit Plan or U.S. Post-Retirement Benefit Plan, although contributions are not required.

Net Cash Used in Investing Activities

Net cash used in investing activities ~~was $124~~decreased $141 million ~~for~~during the ~~three~~nine months ended ~~January~~July 31, 2021 as compared to ~~$5 million for~~ the same period last year. For the ~~three~~nine months ended ~~January~~July 31, 2021, we used ~~$96~~$102 million, net of $11 million cash acquired, for anthe acquisition of Sanjole Inc., a leader in wireless test and measurement solutions for protocol decoding and interoperability. Additionally, we used $34 million, net of cash acquired, for other acquisition activity. For the ~~three~~nine months ended ~~January~~July 31, 2021 and 2020, investments in property, plant and equipment were ~~$28~~$101 million and ~~$32~~$87 million, respectively. For the ~~three~~nine months ended ~~January~~July 31, 2020, we received $32 million of insurance proceeds for property, plant and equipment damaged in the 2017 northern California wildfires, and we used $5$324 million for ~~an acquisition.~~acquisitions.

We anticipate total fiscal 2021 capital spending to be approximately ~~$175 million.~~

~~Table~~$170 million, mainly driven by capital investments to increase the resiliency of ~~Contents~~

our supply chains.

Net Cash Used in Financing Activities

~~For~~Net cash used in financing activities increased $119 million during the ~~three~~nine months ended ~~January~~July 31, 2021 ~~we used $43 million for financing activities, which included $49 million for tax payments related~~compared to ~~net share settlement of equity awards, $20 million for~~the same period last year primarily due to higher treasury stock ~~repurchases, $2 million for payment of acquisition-related contingent consideration, partially offset by proceeds of $28 million from issuance of common stock under employee stock plans.~~repurchases.

For the three months ended January 31, 2020, we used $99 million for financing activities, including $76 million for treasury stock repurchases and $49 million for tax payments related to net share settlement of equity awards, partially offset by proceeds of $26 million from issuance of common stock under employee stock plans.Treasury Stock Repurchases

On November 18, 2020, our board of directors approved a new stock repurchase program authorizing the purchase of up to $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. See "Issuer Purchases of Equity Securities" under Part II Item 2 for additional information.

Contractual and Other Obligations

Our ~~previously approved 2019 stock repurchase program authorizing the purchase~~contractual obligations for commitments to contract manufacturers and suppliers increased to $465 million as of ~~up to $500 million of the company’s common stock was nearly exhausted.~~

~~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 (to a total of $600 million) in the aggregate on one or more occasions upon request. We may use amounts borrowed under the facility for general corporate purposes. As of JanuaryJuly 31, 2021 ~~and~~from $349 million as of October 31, 2020, ~~we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants~~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 ~~the Revolving Credit Facility during the three months ended January 31, 2021.~~

~~Long-Term Debt~~

~~There have been no changes to the principal, maturity, interest rates and interest payment terms of the senior notes during the three months ended January~~July 31, 2021 from $52 million as ~~compared to the senior notes described in our Annual Report on Form 10-K for the fiscal year ended~~of October 31, 2020.

~~Other~~

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, 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, 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 3. 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, 2020. There were no material changes during the ~~three~~nine months ended ~~January~~July 31, 2021 to this information reported in the company’s 2020 Annual Report on Form 10-K.

Item 4. 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

There were no changes in our internal control over financial reporting during the ~~first~~third quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. 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 COVID-19 safety procedures. Our customers, suppliers~~guidance from the Centers for Disease Control and ~~vendors are all subject to these restrictions and orders and are similarly impacted.~~the World Health Organization. Fluctuation in infection rates inhave continued and the ~~regions in which we operate has~~appearance of new and more easily transmitted variants of COVID-19, such as the Delta variant, have resulted in periodic changes in restrictions that vary from region to region and require vigilant attention and rapid ~~response to new or reinstated restrictions.~~response.

The uncertain duration and severity of the pandemic caused by COVID-19 and its variants, as well as 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 requirementsworkers, 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 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.

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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 ~~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.

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 ~~deterioration~~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.

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, new sanctions could be imposed with little notice, which could leave us without an adequate

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alternative solution to compensate for our inability to continue to do business with such customer or supplier. Some of our

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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;

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•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~~charges.

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~~liens. If we breach

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~~certain types of sale and leaseback transactions. If we breach~~ any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, our outstanding indebtedness could be declared immediately due and payable.

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 vulnerable to catastrophic loss due to natural or man-made disasters. Several of our facilities could be subject to a catastrophic loss caused by earthquake or other natural disasters due to their locations. 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. 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.

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.

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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

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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, 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.

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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.

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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 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;

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•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 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).

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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 2. 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 ~~January~~July 31, 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)
November 1, 2020 through November 30, 2020 — — — $750,000,000
December 1, 2020 through December 31, 2020 — — — $750,000,000
January 1, 2021 through January 31, 2021 137,200 145.12 137,200 $730,089,433
Total 137,200 137,200


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


(1)			On November 18, 2020, our board of directors approved a new stock repurchase program authorizing the purchase of up to $750 million of the company’s common stock. 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.
(2)			The weighted average price paid per share of common stock does not include the cost of commissions.

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Item 6. 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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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:	~~March 3,~~August 31, 2021	By:	/s/ Neil Dougherty
			Neil Dougherty
			Senior Vice President and Chief Financial Officer
			(Principal Financial Officer)


Dated:	~~March 3,~~August 31, 2021	By:	/s/ John C. Skinner
			John C. Skinner
			Vice President and Corporate Controller
			(Principal Accounting Officer)

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			Page Number
Part I.	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	2223
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3032
	Item 4.	Controls and Procedures	3032
Part II.	Other Information		3133
	Item 1.	Legal Proceedings	3133
	Item 1A.	Risk Factors	3133
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4446
	Item 6.	Exhibits	4547
Signatures			4648