TERADYNE INC
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
TER$218.22+2.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000950170-24-052761
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0000950170-24-089858
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 71 previous paragraphs and 105 current paragraphs.
42 unchanged; 28 reworded; 26 added; 1 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 8 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
Equity method investments
Current report
We account for investments using the equity method of accounting when we have significant influence over the financial and operating policies, but not control, of the investee. The equity method investments are initially recorded at cost and included in ‘Equity method investment’ in the consolidated balance sheet. Teradyne will record its share of investee's net income or loss and other comprehensive income, and the amortization of equity method basis difference on a 3-month lag, which is applied consistently from period to period. These results will be reported in ‘Equity in net earnings of affiliate’ in the consolidated statement of operations. We monitor on an ongoing basis our equity method investments for indicators of other-than-temporary declines in fair value below carrying value.
Current report
During the three months ended July 2, 2023, we recorded $5.1 million of severance charges related to headcount reductions of 112 people, primarily in Semiconductor Test and Robotics, which included charges related to a voluntary early retirement program for employees meeting certain conditions and a charge of $1.1 million for an increase in environmental liability.
Current report
Gain on Sale of Business
Current report
During the three months ended June 30, 2024, we recorded a gain of $57.5 million associated with the sale of DIS to Technoprobe.
Current report
Other (income) expense, net reflects a net change of $4.7 million primarily due to the settlement of our call option purchased in connection with the investment in 10% of Technoprobe.
Current report
The change in income before income taxes in Semiconductor Test, System Test, Wireless Test, and Robotics were driven primarily by fluctuations in revenue within each of the businesses. The gain before income taxes in Corporate and Eliminations was primarily due to the sale of DIS to Technoprobe.
Current report
Six Months 2024 Compared to Six Months 2023
Current report
Revenues
Current report
The increase in Semiconductor Test revenues of $65.1 million, or 7.3%, was driven primarily by higher tester sales for computing, ADAS, and memory applications. The decrease in System Test revenues of $32.8 million, or 19.4%, was due principally to lower sales in Storage Test of system level and hard disk drive testers. The increase in Robotics revenues of $17.1 million or 10.6%, was predominantly from higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The decrease in Wireless Test revenues of $21.6 million, or 26.2%, was primarily due to a decrease in cellular and ultra-wide band test products.
Current report
Gross Profit
Current report
Selling and Administrative
Current report
The increase of $7.0 million in selling and administrative expenses was primarily due to higher spending in Semiconductor Test.
Current report
Engineering and Development
Current report
The increase of $3.5 million in engineering and development expenses was primarily due to higher spending in Semiconductor Test.
Current report
Restructuring and Other
Current report
During the six months ended July 2, 2023, we recorded $7.2 million of severance charges related to headcount reductions of 179 people, primarily in Semiconductor Test and Robotics which included charges related to a voluntary early retirement program for employees meeting certain conditions and a charge of $1.1 million for an increase in environmental liability.
Current report
Gain on Sale of Business
Current report
During the six months ended June 30, 2024, we recorded a gain of $57.5 million associated with the sale of DIS to Technoprobe.
Current report
Interest and Other
Current report
Income (Loss) Before Income Taxes
Current report
The change in income before income taxes in Semiconductor Test, System Test, Wireless Test, and Robotics were driven primarily by fluctuations in revenue within each of the businesses. The gain before income taxes in Corporate and Eliminations was primarily due to the sale of DIS to Technoprobe.
Current report
Income Taxes
Current report
Financing activities during the six months ended June 30, 2024, used cash of $59.3 million due to $185.0 million used for proceeds from borrowings on revolving credit facility of which $185.0 million in payments were paid back in full during the quarter, $37.4 million used for dividend payment, $30.3 million used for the repurchase of 0.3 million shares of common stock at an average price of $101.40 per shares and $13.4 million used for payment related to net settlements of employee stock compensation awards, partially offset by $21.8 million from the issuance of common stock under employee stock purchase and stock option plans.
Current report
Investing activities during the six months ended July 2, 2023, used cash of $121.7 million due to $99.0 million used for purchases of marketable securities and $80.7 million used for purchases of property, plant and equipment, partially offset by $35.6 million and $22.0 million in proceeds from sales and maturities of marketable securities, respectively, and $0.5 million in proceeds from the cancellation of Teradyne owned life insurance policies related to the cash surrender value.
Current report
In January 2023 and May 2023, our Board of Directors declared a quarterly cash dividend of $0.11 per share. Dividend payments for the three months ended July 2, 2023, were $17.0 million and $34.2 million, respectively.
Removed paragraphs (1)
Previous report
The decrease in income before income taxes in Semiconductor Test was driven primarily by lower margins due to product mix as well as higher operating expenses on similar sales levels. The decrease in income before income taxes in Wireless Test was primarily due to a decrease in sales of connectivity and ultra wide band test products. The increase in income before income taxes in Robotics was driven primarily by lower operating expenses on similar sales. The loss before income taxes in Corporate and Eliminations was primarily due to changes in unrealized gains/losses on equity securities and the call option related to our anticipated investment in Technoprobe.
Reworded paragraphs (28)
Previous wording
In the first quarter of 2024, artificial intelligence applications (“AI”) drove Semiconductor Test performance above our plan, particularly in Memory. We expect AI to continue to drive meaningful demand into the second quarter of 2024, helping to offset weak demand in the smartphone mobility test market. We anticipate an upturn in mobility, which may not materialize until 2025.
Current wording
In the second quarter of 2024, we saw strength in Semiconductor Test performance driven by the compute, advanced driver-assistance system ("ADAS"), and memory markets. We expect compute and memory applications to continue to drive meaningful demand in the second half of 2024, helping to offset weakness in the mobility test market. We anticipate an eventual upturn in mobility in 2025.
Previous wording
Our Robotics segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms, and Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation. The market for our Robotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”) throughout the world. Robotics results in the first quarter of 2024 were in line with our forecast, putting us in position for full year growth due to new product offerings, expansion of our Original Equipment Manufacturer (“OEM”) and large account channels, along with increasing recurring revenue via service and software offerings.
Current wording
Our Robotics segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms, and Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation. The market for our Robotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”) throughout the world. Robotics results in the second quarter of 2024 were in line with our revenue forecast, putting us in position for full year growth due to new product offerings and expansion of our Original Equipment Manufacturer (“OEM”) and large account channels, along with increasing recurring revenue through new service and software offerings.
Previous wording
On November 7, 2023, Teradyne and Technoprobe S.p.A, (“Technoprobe”), a leader in the design and production of probe cards, announced the establishment of a strategic partnership that will seek to accelerate growth for both companies and enable higher performance semiconductor test interfaces for customers worldwide. As part of the partnership, Teradyne agreed to make an investment of 481.0 million Euros in exchange for a 10% equity investment in Technoprobe, and Technoprobe agreed to acquire 100% of Teradyne’s Device Interface Solutions ("DIS") business in exchange for $85.0 million. The transaction is expected to close during the second quarter of 2024, subject to regulatory approval.
Current wording
On November 7, 2023, we and Technoprobe S.p.A, (“Technoprobe”), a leader in the design and production of probe cards, announced the establishment of a strategic partnership that will seek to accelerate growth for both companies and enable higher performance semiconductor test interfaces for customers worldwide. As part of the partnership, on May 27, 2024, we made an investment of $524.1 million in exchange for 10% of the issued and outstanding shares of Technoprobe, and we sold our Device Interface Solutions ("DIS") business to Technoprobe in exchange for $85.0 million, net of cash and cash equivalents sold, and a customary working capital adjustment.
Previous wording
Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, historically approximately 70 percent of our Robotics revenue is denominated in foreign currencies. Strengthening of the U.S. dollar would negatively affect Robotics revenue growth in 2024.
Current wording
Our financial statements are denominated in U.S. dollars. While revenues in our test businesses are predominantly in U.S. dollars, the majority of our Robotics revenue is denominated in foreign currencies. Strengthening of the U.S. dollar would negatively affect Robotics revenue growth in 2024.
Previous wording
Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Robotics businesses. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through stock repurchases and dividends and using capital for opportunistic accretive acquisitions.
Current wording
Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Robotics businesses. We have strategically increased engineering and go-to-market spending, primarily in Semiconductor Test and Storage Test, in order to support market share gains. We plan to execute on our strategy while balancing capital allocations between returning capital to our shareholders through stock repurchases and dividends and using capital for opportunistic accretive acquisitions.
Previous wording
We have identified the policies which are critical to understanding our business and our results of operations. There have been no significant changes during the three months ended March 31, 2024, to the items disclosed as our critical accounting policies and estimates 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 December 31, 2023, except as noted below.
Current wording
We have identified the policies which are critical to understanding our business and our results of operations. There have been no significant changes during the six months ended June 30, 2024, to the items disclosed as our critical accounting policies and estimates 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 December 31, 2023, except as noted below.
Previous wording
First Quarter 2024 Compared to First Quarter 2023
Current wording
Second Quarter 2024 Compared to Second Quarter 2023
Previous wording
The decrease in Semiconductor Test revenues of $2.7 million, or 0.7%, was driven primarily by lower tester sales for automotive applications, offset by Memory Test sales in DRAM wafer sort. The increase in System Test revenues of $0.7 million, or 0.9%, was primarily due to higher sales in Defense/Aerospace, partially offset by lower sales in Storage Test of system level testers. The decrease in Wireless Test revenues of $14.1 million, or 36.4% was primarily due to a decrease in connectivity and ultra wide band test products.
Current wording
The increase in Semiconductor Test revenues of $67.9 million, or 14.3%, was driven primarily by higher tester sales for computing, ADAS, and memory applications. The decrease in System Test revenues of $33.5 million, or 35.5%, was due principally to lower sales in Storage Test of system level and hard disk drive testers, and reduced sales of Defense/Aerospace and Commercial Board testers. The increase in Robotics revenues of $18.6 million, or 26.0%, was driven predominantly by higher demand for UR’s collaborative robotic arms and MiR’s autonomous mobile robots. The decrease in Wireless Test revenues of $7.5 million, or 17.1% was primarily due to a decrease in cellular and ultra-wide band test products.
Previous wording
Gross profit as a percent of revenue decreased by 1.2 points, primarily due to product mix and lower volume.
Current wording
Gross profit as a percent of revenue decreased by 0.5 points, primarily due to product mix.
Previous wording
The decrease of $1.8 million in selling and administrative expenses was primarily due to lower spending in Robotics, partially offset by higher spending in Semiconductor Test.
Current wording
The increase of $8.8 million in selling and administrative expenses was primarily due to higher spending in Semiconductor Test.
Previous wording
The decrease of $2.6 million in engineering and development expenses was primarily due to lower spending in Robotics.
Current wording
The increase of $6.1 million in engineering and development expenses was primarily due to higher spending in Semiconductor Test.
Previous wording
During the three months ended April 2, 2023, we recorded $2.0 million of severance charges related to headcount reduction primarily in Semiconductor Test, Robotics and Corporate.
Current wording
During the three months ended June 30, 2024, we recorded $2.0 million of severance charges related to headcount reductions of 35 people, primarily in Robotics.
Previous wording
Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, severance charges, pension, acquisition and divestiture related fees, and an expense for the modification of outstanding equity awards
Current wording
Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, severance charges, pension, acquisition and divestiture related fees, gain on sale of business, and an expense for the modification of outstanding equity awards.
Previous wording
The effective tax rate for the three months ended March 31, 2024 and April 2, 2023, was 11.9% and 14.0%, respectively. The decrease in the effective tax rate from the three months ended April 2, 2023, to three months ended March 31, 2024, primarily resulted from the benefit of a reduction in uncertain tax positions and the benefit of a projected shift in the geographic distribution of income. These benefits were partially offset by a decrease in benefit related to equity compensation.
Current wording
The effective tax rate for the three months ended June 30, 2024, and July 2, 2023, was 15.1% and 16.9%, respectively. The decrease in the effective tax rate from the three months ended July 2, 2023, to the three months ended June 30, 2024, primarily resulted from the benefit of a projected shift in the geographic distribution of income, an increase in benefit related to equity compensation and a reduction in expense related to non-deductible executive compensation. These benefits were partially offset by an increase in expense related to the international provision of the U.S. Tax Cuts and Jobs Act of 2017.
Previous wording
During the three months ended March 31, 2024, we recorded $2.2 million of acquisition and divestiture related costs and $2.0 million of severance charges related to headcount reductions primarily in Semiconductor Test and Robotics.
Current wording
During the six months ended June 30, 2024, we recorded $2.2 million of acquisition and divestiture expenses related to the Technoprobe transactions, and $4.2 million of severance and other charges, primarily related to headcount reductions of 66 people, principally in Robotics and Semiconductor Test, which included charges related to a voluntary early retirement program for employees meeting certain conditions.
Previous wording
Other (income) expense, net increased $12.0 million primarily due to the change in value of our call option purchased in connection with the anticipated acquisition of Technoprobe.
Current wording
Other (income) expense, net increased $7.3 million primarily due to the settlement of our call option purchased in connection with the investment in 10% of Technoprobe.
Previous wording
Our cash, cash equivalents and marketable securities balances decreased by $66.6 million in the three months ended March 31, 2024, to $870.6 million.
Current wording
Our cash, cash equivalents and marketable securities balances decreased by $352.9 million in the six months ended June 30, 2024, to $584.3 million.
Previous wording
Operating activities during the three months ended March 31, 2024, provided cash of $7.3 million. Changes in operating assets and liabilities used cash of $108.6 million due to a $3.9 million increase in operating assets and a $104.7 million decrease in operating liabilities.
Current wording
Operating activities during the six months ended June 30, 2024, provided cash of $223.3 million. Changes in operating assets and liabilities used cash of $65.3 million due to a $14.9 million increase in operating assets and a $50.4 million decrease in operating liabilities.
Previous wording
The increase in operating assets was primarily due to an $8.1 million and $6.9 million increase in accounts receivable and inventories, respectively, partially offset by a $11.1 million decrease in other assets.
Current wording
The increase in operating assets was primarily due to a $54.2 million increase in accounts receivable driven by higher sales in the second quarter of 2024, partially offset by decreases in other assets and inventory of $22.2 million and $17.1 million, respectively.
Previous wording
The decrease in operating liabilities was due to a $70.2 million decrease in accrued employee compensation $28.4 million decrease in accounts payable, $7.0 million decrease in accrued other, $1.4 million decrease in deferred revenue and customer advance payments, and $1.4 million of retirement plan contributions, partially offset by a $3.8 million increase in income taxes.
Current wording
The decrease in operating liabilities was due to a $30.0 million decrease in accrued employee compensation, $22.0 million decrease in accounts payable, $2.8 million decrease in retirement plans, and $1.0 million decrease in accrued other, partially offset by a $2.7 million increase in deferred revenue and customer advances and a $2.6 million increase in income taxes.
Previous wording
Investing activities during the three months ended March 31, 2024, used cash of $24.0 million due to $44.0 million used for the purchases of property, plant and equipment, $16.0 million used for the purchase of marketable securities, partially offset by $20.7 million and $14.4 million in proceeds from the sale of maturities and marketable securities, respectively, and $0.9 million in proceeds from life insurance.
Current wording
Investing activities during the six months ended June 30, 2024, used cash of $505.1 million due to $524.7 million used for the purchases of investment, $88.9 million used for the purchase of property, plant and equipment, $27.8 million used for the purchase of marketable securities, partially offset by $87.2 million in proceeds from the sale of a business, $26.9 million and $21.3 million in proceeds from the sale of maturities and marketable securities, respectively, and $0.9 million in proceeds from life insurance.
Previous wording
Operating activities during the three months ended April 2, 2023, provided cash of $19.3 million. Changes in operating assets and liabilities used cash of $106.5 million due to a $1.9 million increase in operating assets and $104.7 million decrease in operating liabilities.
Current wording
Operating activities during the six months ended July 2, 2023, provided cash of $162.1 million. Changes in operating assets and liabilities used cash of $121.7 million due to a $46.1 million increase in operating assets and $75.5 million decrease in operating liabilities.
Previous wording
The increase in operating assets was due to a $23.7 million increase in inventories, a $15.4 million increase in prepayments and other assets due to prepayments to our contract manufactures, partially offset by a $37.2 million decrease in accounts receivable.
Current wording
The increase in operating assets was primarily due to a $29.6 million increase in prepayments and other assets due to prepayments to our contract manufacturers, a $13.8 million increase in inventories and a $2.7 million increase in accounts receivable.
Previous wording
The decrease in operating liabilities was due to a $93.1 million decrease in accrued employee compensation, a $32.7 million decrease in deferred revenue and customer advance payments, and $1.2 million of retirement plan contributions, partially offset by a $12.5 million increase in income taxes, a $9.6 million increase in accrued other liabilities, and a $0.3 million increase in accounts payable.
Current wording
The decrease in operating liabilities was due to a $48.9 million decrease in accrued employee compensation, a $34.9 million decrease in deferred revenue and customer advance payments, a $13.6 million decrease in income taxes, and $2.5 million of retirement plan contributions, partially offset by $13.0 million increase in accounts payable and an $11.4 million increase in other accrued liabilities.
Previous wording
Financing activities during the three months ended March 31, 2024, used cash of $36.7 million due to $22.1 million used for the repurchase of 0.2 million shares of common stock at an average price of $100.31 per share, $18.4 million used for dividend payments and $13.1 million used for payment related to net settlements of employee stock compensation awards, partially offset by $16.9 million from the issuance of common stock under employee stock purchase and stock option plans.
Current wording
Financing activities during the six months ended July 2, 2023, used cash of $283.2 million due to $227.8 million used for the repurchase of 2.2 million shares of common stock at an average price of $102.35 per share, $20.3 million used for payment related to net settlements of employee stock compensation awards, $34.2 million used for dividend payments, and $17.5 million used for payments of convertible debt principal, partially offset by $16.6 million from the issuance of common stock under employee stock purchase and stock option plans.
Previous wording
In January 2024 and January 2023, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.12 per share and $0.11 per share, respectively. Dividend payments for the three months ended March 31, 2024 and April 2, 2023, were $18.4 million and $17.2 million, respectively.
Current wording
In January 2024 and May 2024, our Board of Directors declared a quarterly cash dividend of $0.12 per share. Dividend payments for the three months ended June 30, 2024, were $19.0 million and $37.4 million, respectively.
Previous wording
During the three months ended March 31, 2024, we repurchased 0.2 million shares of common stock for $22.1 million, which excludes related excise tax, at an average price of $100.31 per share. We intend to repurchase up to $90.0 million of common stock in 2024 subject to market conditions. The cumulative repurchases under the 2023 repurchase program as of March 31, 2024 were 4.1 million shares of common stock for $419.4 million, which excludes related excise tax, at an average price per share of $102.35. During the three months ended April 2, 2023 , we repurchased 0.9 million shares of common stock for $93.3 million, which excludes related excise tax, at an average price of $104.88 per share.
Current wording
During the six months ended June 30, 2024, we repurchased 0.3 million shares of common stock for $30.3 million, which excludes related excise tax, at an average price of $101.40 per share. We intend to repurchase up to $90.0 million of common stock in 2024 subject to market conditions. The cumulative repurchases under the 2023 repurchase program as of June 30, 2024, were 4.2 million shares of common stock for $430.8 million, which excludes related excise tax, at an average price per share of $102.39. During the six months ended July 2, 2023, we repurchased 2.2 million shares of common stock for $227.8 million, which excludes related excise tax, at an average price of $107.50 per share.
Previous wording
On May 1, 2020, we entered into a credit agreement providing a three-year, senior secured revolving credit facility of $400 million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026. On October 5, 2022, the credit agreement was amended to increase the amount of the credit facility to $750.0 million from $400.0 million. As of May 3, 2024, we have not borrowed any funds under the credit facility.
Current wording
On May 1, 2020, we entered into a credit agreement providing a three-year, senior secured revolving credit facility of $400.0 million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026. On October 5, 2022, the credit agreement was amended to increase the amount of the credit facility to $750.0 million from $400.0 million. On November 7, 2023, the Credit Agreement was amended to allow for the purchase of the shares of Technoprobe. On May 16, 2024, the Company borrowed $185.0 million under the credit agreement to fund the acquisition of 10% of the issued and outstanding shares of Technoprobe. The Company has fully repaid its borrowings on the revolving credit facility prior to June 30, 2024. As of August 2, 2024, there are no outstanding borrowings under the credit facility.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
Revenues by our reportable segments were as follows:
Current report — wording carried from elsewhere
Revenues by country as a percentage of total revenues were as follows (1):
Current report — wording carried from elsewhere
Revenues attributable to a country are based on location of customer site.
Current report — wording carried from elsewhere
Our gross profit was as follows:
Current report — wording carried from elsewhere
Gross profit as a percent of revenue decreased by 0.7 points, primarily due to product mix.
Current report — wording carried from elsewhere
Selling and administrative expenses were as follows:
Current report — wording carried from elsewhere
Engineering and development expenses were as follows:
Current report — wording carried from elsewhere
Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, severance charges, pension, acquisition and divestiture related fees, gain on sale of business, and an expense for the modification of outstanding equity awards.
Current report — wording carried from elsewhere
The effective tax rate for the six months ended June 30, 2024, and July 2, 2023, was 14.3% and 15.7%, respectively. The decrease in the effective tax rate from the six months ended July 2, 2023, to the six months ended June 30, 2024, primarily resulted from the benefit of a projected shift in the geographic distribution of income and a reduction in expense related to non-deductible executive compensation. These benefits were partially offset by an increase in expense related to the international provision of the U.S. Tax Cuts and Jobs Act of 2017 and a decrease in benefit related to equity compensation.