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Teradyne Reports First Quarter 2023 Results

  • Revenue and earnings above the mid-point of Q1 guidance
  • Revenue of $618 million in Q1’23, down 18% from Q1’22
  • Returned $110 million to shareholders in share repurchases and dividends in Q1’23
  Q1’23 Q1’22 Q4’22  
Revenue (mil) $618 $755 $732  
GAAP EPS $0.50 $0.92 $1.04  
Non-GAAP EPS $0.55 $0.98 $0.92  
         

===================================================================

NORTH READING, Mass., April 26, 2023 (GLOBE NEWSWIRE) — Teradyne, Inc. (NASDAQ: TER) reported revenue of $618 million for the first quarter of 2023 of which $415 million was in Semiconductor Test, $75 million in System Test, $39 million in Wireless Test and $89 million in Robotics. GAAP net income for the first quarter was $83.5 million or $0.50 per diluted share. On a non-GAAP basis, Teradyne’s net income in the first quarter was $91.3 million, or $0.55 per diluted share, which excluded stock compensation modification expense, acquired intangible asset amortization, restructuring and other charges, discrete income tax items and included the related tax impact on non-GAAP adjustments.

“A faster recovery from supply chain constraints in our test businesses and Robotics shipments within the range of our expectations contributed to first quarter financial results that were above the mid-point of guidance,” said Teradyne CEO Greg Smith. “Looking ahead, we expect stronger demand in automotive and industrial semiconductor test to help offset ongoing weakness in smartphone related end markets. In Robotics, slowing global industrial growth is contributing to softening near-term demand.”

Guidance for the second quarter of 2023 is revenue of $625 million to $685 million, with GAAP net income of $0.53 to $0.72 per diluted share and non-GAAP net income of $0.55 to $0.74 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization and includes the related tax impact on non-GAAP adjustments.

Webcast
A conference call to discuss the first quarter results, along with management’s business outlook, will follow at 8:30 a.m. ET, Thursday, April 27. Interested investors should access the webcast at www.teradyne.com and click on “Investors” at least five minutes before the call begins. Presentation materials will be available starting at 8:30 a.m. ET. A replay will be available on the Teradyne website at www.teradyne.com/investors.

Non-GAAP Results
In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses non-GAAP results of operations that exclude certain income items and charges. These results are provided as a complement to results provided in accordance with GAAP. Non-GAAP income from operations and non-GAAP net income exclude acquired intangible assets amortization, restructuring and other, pension actuarial gains and losses, stock compensation modification expense, discrete income tax adjustments, and includes the related tax impact on non-GAAP adjustments. GAAP requires that these items be included in determining income from operations and net income. Non-GAAP income from operations, non-GAAP net income, non-GAAP income from operations as a percentage of revenue, non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP performance measures presented to provide meaningful supplemental information regarding Teradyne’s baseline performance before gains, losses or other charges that may not be indicative of Teradyne’s current core business or future outlook. These non-GAAP performance measures are used to make operational decisions, to determine employee compensation, to forecast future operational results, and for comparison with Teradyne’s business plan, historical operating results and the operating results of Teradyne’s competitors. Non-GAAP diluted shares include the impact of Teradyne’s call option on its shares. Management believes each of these non-GAAP performance measures provides useful supplemental information for investors, allowing greater transparency to the information used by management in its operational decision making and in the review of Teradyne’s financial and operational performance, as well as facilitating meaningful comparisons of Teradyne’s results in the current period compared with those in prior and future periods. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibits and on the Teradyne website at www.teradyne.com by clicking on “Investor Relations” and then selecting “Financials” and the “GAAP to Non-GAAP Reconciliation” link. The non-GAAP performance measures discussed in this press release may not be comparable to similarly titled measures used by other companies. The presentation of non-GAAP measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP.

About Teradyne
Teradyne (NASDAQ:TER) test technology helps bring high-quality innovations such as smart devices, life-saving medical equipment and data storage systems to market, faster. Its advanced test solutions for semiconductors, electronic systems, wireless devices and more ensure that products perform as they were designed. Its robotics offerings include collaborative and mobile robots that help manufacturers of all sizes increase productivity, improve safety, and lower costs. In 2022, Teradyne had revenue of $3.2 billion and today employs over 6,600 people worldwide. For more information, visit teradyne.com. Teradyne® is a registered trademark of Teradyne, Inc., in the U.S. and other countries.

Safe Harbor Statement
This release contains forward-looking statements regarding Teradyne’s future business prospects, results of operations, market conditions, earnings per share, the impact of supply chain conditions on the business, customer sales expectations, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program, the continued impact of the global COVID-19 pandemic, and the impact of U.S. and Chinese export and tariff laws, including new regulations published by the U.S. Department of Commerce on October 7, 2022. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, events, customer sales, supply chain conditions or improvements, earnings per share, use of cash, payment of dividends, repurchases of common stock, payment of the senior convertible notes, the impact of the COVID-19 pandemic, the impact of any tariffs or export controls imposed by the U.S. or China, compliance with trade protection measures or export restrictions, the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei, HiSilicon and other customers or potential customers, the impact of U.S. Department of Commerce export control regulations for certain U.S. products and technology sold to military end users or for military end-use in China, or the impact of regulations published by the U.S. Department of Commerce relating to the export of semiconductors and semiconductor manufacturing equipment destined to certain end users and for certain end uses in China. There can be no assurance that management’s estimates of Teradyne’s future results or other forward-looking statements will be achieved. Specifically, Teradyne’s 2026 earnings model is aspirational and includes many assumptions. There can be no assurance that these assumptions will be accurate or that model results will be achieved. As set forth below, there are many factors that could cause our 2026 earnings model and actual results to differ materially from those presently expected. Additionally, the current dividend and share repurchase programs may be modified, suspended or discontinued at any time.

On October 7, 2022, the U.S. Department of Commerce published new regulations restricting the export to China of advanced semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and technology for the manufacturing in China of certain semiconductor manufacturing equipment. The new restrictions are lengthy and complex. Teradyne continues to assess the impact of these regulations on its business. At this time, the Company has determined that restrictions on the sale of semiconductor testers in China to test certain advanced semiconductors will impact Teradyne’s sales to certain companies in China. Several multinational companies manufacturing these advanced semiconductors in China have obtained one-year licenses allowing suppliers such as Teradyne to continue to provide testers to the facilities operated by these companies. We expect that other companies manufacturing advanced semiconductors in China will not receive licenses, thereby restricting Teradyne’s ability to provide testers to the facilities operated by these companies that do not receive a license. The Company is filing license requests to sell to and support certain customers in China for certain end uses that, if granted, may reduce the impact of these restrictions on the Company’s business. At this time, Teradyne does not know the impact these end user and end use restrictions will have on its business in China or on future revenues. In addition to the specific restrictions impacting Teradyne’s business, the regulations may have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, Teradyne’s business and revenues will be adversely impacted.

The Company also has determined that the restrictions on the export of certain US origin components and technology for use in the development and production in China of certain semiconductor manufacturing equipment impact its manufacturing and development operations in China. Teradyne has received a temporary authorization from the Department of Commerce allowing the Company to continue its manufacturing and development operations in China until the Department of Commerce issues a license to replace this temporary authorization. The Company has applied for a license but cannot assess the likelihood or timing of receiving this license. In addition to requesting a license, the Company is implementing procedures for minimizing the impact of these new regulations, but there is no assurance that these procedures will succeed.

Important factors that could cause actual results, the 2026 earnings model, earnings per share, use of cash, dividend payments, repurchases of common stock, or payment of the senior convertible notes to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand from one or more significant customers; development, delivery and acceptance of new products; the ability to grow the Robotics business; increased research and development spending; deterioration of Teradyne’s financial condition; the continued impact of the COVID-19 pandemic and related government responses on the market and demand for Teradyne’s products, on its contract manufacturers and supply chain, and on its workforce; the impact of a supply shortage on our supply chain and contract manufacturers; the consummation and success of any mergers or acquisitions; unexpected cash needs; insufficient cash flow to make required payments and pay the principal amount on the senior convertible notes; the business judgment of the board of directors that a declaration of a dividend or the repurchase of common stock is not in the Company’s best interests; additional U.S. or global tax regulations or guidance; the impact of any tariffs or export controls imposed by the U.S. or China; compliance with trade protection measures or export restrictions; the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei, HiSilicon and other customers or potential customers; the impact of U.S. Department Commerce export control regulations for certain U.S. products and technology sold to military end users or for military end-use in China; the impact of regulations published by the U.S. Department of Commerce relating to semiconductors and semiconductor manufacturing equipment destined for certain end uses in China; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” section of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The forward-looking statements provided by Teradyne in this press release represent management’s views as of the date of this release. Teradyne anticipates that subsequent events and developments may cause management’s views to change. However, while Teradyne may elect to update these forward-looking statements at some point in the future, Teradyne specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Teradyne’s views as of any date subsequent to the date of this release.

TERADYNE, INC. REPORT FOR FIRST FISCAL QUARTER OF 2023
 
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS
 
 
      Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022
                     
Net revenues $ 617,529     $ 731,836     $ 755,370  
  Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1) 261,109     311,387     300,437  
                     
Gross profit 356,420     420,449     454,933  
                     
Operating expenses:                
  Selling and administrative (2) 150,955     142,752     140,185  
  Engineering and development 105,762     108,810     108,116  
  Acquired intangible assets amortization 4,802     4,670     5,063  
  Restructuring and other (3) 2,037     (2,369 )   15,714  
    Operating expenses 263,556     253,863     269,078  
                     
Income from operations 92,864     166,586     185,855  
                     
  Interest and other (income) expense (4) (4,220 )   (28,651 )   5,496  
                     
Income before income taxes 97,084     195,237     180,359  
  Income tax provision 13,553     22,936     18,431  
Net income $ 83,531     $ 172,301     $ 161,928  
                     
Net income per common share:                
Basic $ 0.54     $ 1.11     $ 1.00  
Diluted $ 0.50     $ 1.04     $ 0.92  
                     
Weighted average common shares – basic 155,904     155,762     162,048  
                     
Weighted average common shares – diluted (5) 166,308     165,468     175,565  
                     
                     
Cash dividend declared per common share $ 0.11     $ 0.11     $ 0.11  
                     
                     
                     
(1) Cost of revenues includes: Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022
    Provision for excess and obsolete inventory $ 5,610     $ 11,787     $ 1,590  
    Sale of previously written down inventory (385 )   (828 )   (262 )
      $ 5,225     $ 10,959     $ 1,328  
                     
(2) For the quarter ended April 2, 2023, selling and administrative expenses include an equity charge of $5.9 million for the modification of Teradyne’s retired CEO’s outstanding equity awards in connection with his February 1, 2023 retirement.        
                     
(3) Restructuring and other consists of: Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022 
    Employee severance $ 2,037     $ 775     $ 551  
    Gain on sale of asset     (3,410 )    
    Litigation settlement         14,700  
    Other     266     463  
      $ 2,037     $ (2,369 )   $ 15,714  
                     
(4) Interest and other includes: Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022
    Pension actuarial gains $     $ (25,592 )   $  
      $     $ (25,592 )   $  
                     
(5) Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the quarters ended April 2, 2023, December 31, 2022, and April 3, 2022, 0.9 million, 1.2 million and 2.5 million shares, respectively, have been included in diluted shares. For the quarters ended April 2, 2023, December 31, 2022 and April 3, 2022, diluted shares also included 9.0 million, 7.9 million and 10.0 million shares, respectively, from the convertible note hedge transaction. 

CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (In thousands)   
           
      April 2,
2023
  December 31,
2022
Assets        
  Cash and cash equivalents $            649,208   $              854,773
  Marketable securities                92,895                     39,612
  Accounts receivable, net              455,334                  491,145
  Inventories, net              352,058                  325,019
  Prepayments              549,114                  532,962
  Other current assets                13,367                     14,404
    Total current assets           2,111,976               2,257,915
           
  Property, plant and equipment, net              432,381                  418,683
  Operating lease right-of-use assets, net                74,939                     73,734
  Marketable securities              116,938                  110,777
  Deferred tax assets              148,527                  142,784
  Retirement plans assets                11,650                     11,761
  Other assets                27,922                     28,925
  Acquired intangible assets, net                49,246                     53,478
  Goodwill              409,828                  403,195
    Total assets $         3,383,407   $           3,501,252
           
Liabilities        
  Accounts payable $            142,382   $              139,722
  Accrued employees’ compensation and withholdings              119,433                  212,266
  Deferred revenue and customer advances              119,355                  148,285
  Other accrued liabilities              114,739                  112,271
  Operating lease liabilities                19,985                     18,594
  Income taxes payable                77,089                     65,010
  Current debt                35,109                     50,115
           
    Total current liabilities              628,092                  746,263
           
  Retirement plans liabilities              121,303                  116,005
  Long-term deferred revenue and customer advances                41,797                     45,131
  Long-term other accrued liabilities                16,211                     15,981
  Deferred tax liabilities                   2,325                       3,267
  Long-term operating lease liabilities                65,082                     64,176
  Long-term income taxes payable                59,135                     59,135
    Total liabilities              933,945               1,049,958
           
Shareholders’ equity           2,449,462               2,451,294
    Total liabilities and shareholders’ equity $         3,383,407   $           3,501,252

CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS (In thousands)
                   
        Quarter Ended
        April 2,
2023
  April 3,
2022
Cash flows from operating activities:          
  Net income $             83,531     $             161,928  
  Adjustments to reconcile net income to net cash provided by operating activities:          
    Depreciation 22,680     22,503  
    Stock-based compensation 18,885     12,894  
    Provision for excess and obsolete inventory 5,610     1,590  
    Amortization 4,926     5,233  
    Deferred taxes (7,634 )   11,288  
    (Gains) losses on investments (2,238 )   2,001  
    Other 108     177  
                 
    Changes in operating assets and liabilities          
      Accounts receivable 37,204     208  
      Inventories (23,697 )   (9,480 )
      Prepayments and other assets (15,380 )   (74,305 )
      Accounts payable and other liabilities (83,208 )   (124,382 )
      Deferred revenue and customer advances (32,705 )   6,747  
      Retirement plans contributions (1,234 )   (1,329 )
      Income taxes 12,488     (7,611 )
      Net cash provided by operating activities 19,336     7,462  
                 
Cash flows from investing activities:          
  Purchases of property, plant and equipment (41,444 )   (43,999 )
  Purchases of marketable securities (69,276 )   (165,977 )
  Proceeds from sales of marketable securities 7,929     30,581  
  Proceeds from maturities of marketable securities 7,468     96,682  
  Proceeds from life insurance 460      
Net cash used for investing activities (94,863 )   (82,713 )
                 
Cash flows from financing activities:          
  Repurchase of common stock (93,308 )   (201,465 )
  Payments related to net settlement of employee stock compensation awards (19,870 )   (31,048 )
  Dividend payments (17,165 )   (17,895 )
  Payments of convertible debt principal (15,155 )   (20,694 )
  Issuance of common stock under stock purchase and stock option plans 15,997     16,475  
Net cash used for financing activities (129,501 )   (254,627 )
                 
Effects of exchange rate changes on cash and cash equivalents (537 )   2,282  
Decrease in cash and cash equivalents (205,565 )   (327,596 )
Cash and cash equivalents at beginning of period 854,773     1,122,199  
Cash and cash equivalents at end of period $           649,208     $             794,603  
GAAP to Non-GAAP Earnings Reconciliation
 
(In millions, except per share amounts)
                  Quarter Ended                        
  April 2,
2023
  % of Net Revenues           December 31, 2022   % of Net Revenues           April 3,
2022
  % of Net Revenues        
                                               
Net revenues $ 617.5                 $ 731.8                 $ 755.4              
                                               
Gross profit GAAP and non-GAAP $ 356.4       57.7 %           $ 420.4     57.4 %           $ 454.9     60.2 %        
                                               
Income from operations – GAAP $ 92.9       15.0 %           $ 166.6     22.8 %           $ 185.9     24.6 %        
Equity modification charge (1)   5.9       1.0 %                                            
Acquired intangible assets amortization   4.8       0.8 %             4.7     0.6 %             5.1     0.7 %        
Restructuring and other (2)   2.0       0.3 %             (2.4 )   -0.3 %             15.7     2.1 %        
Income from operations – non-GAAP $ 105.6       17.1 %           $ 168.9     23.1 %           $ 206.7     27.4 %        
                                               
          Net Income
per Common Share
          Net Income
per Common Share
          Net Income
per Common Share
  April 2,
2023
  % of Net Revenues   Basic   Diluted   December 31, 2022   % of Net Revenues   Basic   Diluted   April 3,
2022
  % of Net Revenues   Basic   Diluted
Net income – GAAP $ 83.5       13.5 %   $ 0.54     $ 0.50     $ 172.3     23.5 %   $ 1.11     $ 1.04     $ 161.9     21.4 %   $ 1.00     $ 0.92  
Equity modification charge (1)   5.9       1.0 %     0.04       0.04                                              
Acquired intangible assets amortization   4.8       0.8 %     0.03       0.03       4.7     0.6 %     0.03       0.03       5.1     0.7 %     0.03       0.03  
Restructuring and other (2)   2.0       0.3 %     0.01       0.01       (2.4 )   -0.3 %     (0.02 )     (0.01 )     15.7     2.1 %     0.10       0.09  
Pension mark-to-market adjustment (3)                           (25.6 )   -3.5 %     (0.16 )     (0.15 )                      
Exclude discrete tax adjustments   (2.5 )     -0.4 %     (0.02 )     (0.02 )     (2.8 )   -0.4 %     (0.02 )     (0.02 )     (10.4 )   -1.4 %     (0.06 )     (0.06 )
Non-GAAP tax adjustments   (2.4 )     -0.4 %     (0.02 )     (0.01 )     4.5     0.6 %     0.03       0.03       (3.3 )   -0.4 %     (0.02 )     (0.02 )
Convertible share adjustment (4)                                           0.01                       0.01  
Net income – non-GAAP $ 91.3       14.8 %   $ 0.59     $ 0.55     $ 150.8     20.6 %   $ 0.97     $ 0.92     $ 169.0     22.4 %   $ 1.04     $ 0.98  
                                               
GAAP and non-GAAP weighted average common shares – basic   155.9                   155.8                   162.0              
GAAP weighted average common shares – diluted   166.3                   165.5                   175.6              
Exclude dilutive shares related to convertible note transaction   (0.9 )                 (1.2 )                 (2.5 )            
Non-GAAP weighted average common shares – diluted   165.4                   164.3                   173.1              
                                               
                                               
(1) For the quarter ended April 2, 2023, selling and administrative expenses include an equity charge of $5.9 million for the modification of Teradyne’s retired CEO’s outstanding equity awards in connection with his February 1, 2023 retirement.
                                               
(2) Restructuring and other consists of:
  Quarter Ended            
  April 2,
2023
              December 31, 2022               April 3,
2022
           
Employee severance $ 2.0                 $ 0.8                 $ 0.6              
Gain on sale of asset                     (3.4 )                              
Litigation Settlement                                       14.7              
Other                     0.3                   0.5              
  $ 2.0                 $ (2.4 )               $ 15.7              
                                               
                                               
(3) For the quarter ended December 31, 2022 adjustments to exclude actuarial (gain)loss recognized under GAAP in accordance with Teradyne’s mark-to-market pension accounting.
                                               
(4) For the quarters ended April 2, 2023, December 31, 2022, and April 3, 2022, the non-GAAP diluted EPS calculation adds back $0.1 million, $0.2 million, and $0.3 million, respectively, of convertible debt interest expense to non-GAAP net income. For the quarters ended April 2, 2023, December 31, 2022, and April 3, 2022, non-GAAP weighted average diluted common shares include 9.0 million, 7.9 million and 10.0 million shares, respectively, from the convertible note hedge transaction.
                                               
GAAP to Non-GAAP Reconciliation of Second Quarter 2023 guidance:
                                               
GAAP and non-GAAP second quarter revenue guidance:     $625 million to $685 million                                    
GAAP net income per diluted share     $ 0.53     $ 0.72                                      
Exclude acquired intangible assets amortization       0.03       0.03                                      
Non-GAAP net income per diluted share     $ 0.55     $ 0.74                                      

For press releases and other information of interest to investors, please visit Teradyne’s homepage at http://www.teradyne.com.
Contact: Teradyne, Inc.
Andy Blanchard 978-370-2425
Vice President of Corporate Relations

Disclaimer: The above press release comes to you under an arrangement with GlobeNewswire. TheTechOutlook.com takes no editorial responsibility for the same.



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