TERADYNE, INC (Form: 10-Q, Received: 08/02/2024 15:07:39)

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PART I

Item 1: Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2024			December 31, 2023
	(in thousands, except per share amount)
ASSETS
Current assets:
Cash and cash equivalents	$	421,904		$	757,571
Marketable securities		38,654			62,154
Accounts receivable, less allowance for credit losses of $1,944 and $1,988 at June 30, 2024 and December 31, 2023, respectively		470,297			422,124
Inventories, net		288,748			309,974
Prepayments		515,906			548,970
Other current assets		20,884			37,992
Current assets held for sale		—			23,250
Total current assets		1,756,393			2,162,035
Property, plant and equipment, net		472,457			445,492
Operating lease right-of-use assets, net		72,381			73,417
Marketable securities		123,723			117,434
Deferred tax assets		192,901			175,775
Retirement plans assets		11,293			11,504
Equity method investment		524,060			—
Other assets		47,923			38,580
Acquired intangible assets, net		25,465			35,404
Goodwill		405,110			415,652
Long-term assets held for sale		—			11,531
Total assets	$	3,631,706		$	3,486,824
LIABILITIES
Current liabilities:
Accounts payable	$	160,808		$	180,131
Accrued employees’ compensation and withholdings		161,187			191,750
Deferred revenue and customer advances		102,988			99,804
Other accrued liabilities		108,746			114,712
Operating lease liabilities		18,280			17,522
Income taxes payable		74,365			48,653
Current liabilities held for sale		—			7,379
Total current liabilities		626,374			659,951
Retirement plans liabilities		135,167			132,090
Long-term deferred revenue and customer advances		36,146			37,282
Long-term other accrued liabilities		16,632			19,998
Deferred tax liabilities		96			183
Long-term operating lease liabilities		61,883			65,092
Long-term incomes taxes payable		24,596			44,331
Long-term liabilities held for sale		—			2,000
Total liabilities		900,894			960,927
Commitments and contingencies (Note R)
SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized; 161,802 and 152,698 shares issued and outstanding at June 30, 2024, and December 31, 2023, respectively		20,225			19,087
Additional paid-in capital		1,865,351			1,827,274
Accumulated other comprehensive loss		(44,104	)		(26,978	)
Retained earnings		889,340			706,514
Total shareholders’ equity		2,730,812			2,525,897
Total liabilities and shareholders’ equity	$	3,631,706		$	3,486,824

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2023, are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	June 30, 2024			July 2, 2023			June 30, 2024			July 2, 2023
	(in thousands, except per share amount)						(in thousands, except per share amount)
Revenues:
Products	$	596,877		$	540,375		$	1,055,310		$	1,013,793
Services		133,002			144,062			274,388			288,173
Total revenues		729,879			684,437			1,329,698			1,301,966
Cost of revenues:
Cost of products		250,236			217,011			450,999			415,675
Cost of services		53,799			64,934			113,573			127,379
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		304,035			281,945			564,572			543,054
Gross profit		425,844			402,492			765,126			758,912
Operating expenses:
Selling and administrative		154,470			145,695			303,658			296,650
Engineering and development		111,816			105,706			215,015			211,468
Acquired intangible assets amortization		4,664			4,825			9,361			9,627
Restructuring and other		2,012			6,358			6,440			8,395
Gain on sale of business		(57,486	)		—			(57,486	)		—
Total operating expenses		215,476			262,584			476,988			526,140
Income from operations		210,368			139,908			288,138			232,772
Non-operating (income) expense:
Interest income		(6,715	)		(6,354	)		(14,582	)		(11,613	)
Interest expense		1,530			1,045			2,190			2,031
Other (income) expense, net		(3,850	)		815			8,225			868
Income before income taxes		219,403			144,402			292,305			241,486
Income tax provision		33,130			24,352			41,835			37,905
Net income	$	186,273		$	120,050		$	250,470		$	203,581
Net income per common share:
Basic	$	1.18		$	0.78		$	1.61		$	1.31
Diluted	$	1.14		$	0.73		$	1.54		$	1.23
Weighted average common shares—basic		157,804			154,760			155,426			155,332
Weighted average common shares—diluted		163,470			164,751			162,909			165,530

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	June 30, 2024			July 2, 2023			June 30, 2024			July 2, 2023
	(in thousands)						(in thousands)
Net income	$	186,273		$	120,050		$	250,470		$	203,581
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0, $0, $0, and $0, respectively		(3,629	)		2,943			(15,087	)		12,250
Available-for-sale marketable securities:
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(183), $(180), $(404) and $323, respectively		(721	)		(568	)		(1,622	)		1,726
Less: Reclassification adjustment for (gains) losses included in net income, net of tax of $(4), $8, $26, and $10, respectively		(13	)		28			92			33
		(734	)		(540	)		(1,530	)		1,759
Cash flow hedges:
Unrealized gains arising during period, net of tax of $0, $920, $358, and $1,088, respectively	—				3,270			1,274			3,866
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $0, $91, $(500) and $428, respectively	—				323			(1,780	)		1,524
		—			3,593			(506	)		5,390
Defined benefit post-retirement plan:
Amortization of prior service credit, net of tax of $0, $0, $(1), and $(1), respectively		(2	)		(2	)		(3	)		(3	)
Other comprehensive income (loss)		(4,365	)		5,994			(17,126	)		19,396
Comprehensive income	$	181,908		$	126,044		$	233,344		$	222,977

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


	Shareholders' Equity
	Common Stock Shares			Common Stock Par Value			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders’ Equity
	(in thousands)
For the Three Months Ended June 30, 2024
Balance, March 31, 2024		153,757		$	19,220		$	1,848,088		$	(39,739	)	$	730,260		$	2,557,829
Net issuance of common stock under stock-based plans		125			15			4,615									4,630
Stock-based compensation expense								13,660									13,660
Warrant exercises		7,998			1,000			(1,012	)								(12	)
Repurchase of common stock		(78	)		(10	)								(8,185	)		(8,195	)
Cash dividends ($0.12 per share)														(19,008	)		(19,008	)
Net income														186,273			186,273
Other comprehensive income (loss)											(4,365	)					(4,365	)
Balance, June 30, 2024		161,802		$	20,225		$	1,865,351		$	(44,104	)	$	889,340		$	2,730,812
For the Three Months Ended July 2, 2023
Balance, April 2, 2023		155,445		$	19,431		$	1,772,352		$	(36,466	)	$	694,145		$	2,449,462
Net issuance of common stock under stock-based plans		52			7			161									168
Stock-based compensation expense								12,077									12,077
Repurchase of common stock		(1,349	)		(169	)								(135,668	)		(135,837	)
Cash dividends ($0.11 per share)														(17,031	)		(17,031	)
Settlements of convertible notes		50			6			(6	)								—
Exercise of convertible notes hedge call options		(50	)		(6	)		6									—
Net income														120,050			120,050
Other comprehensive income (loss)											5,994						5,994
Balance, July 2, 2023		154,148		$	19,269		$	1,784,590		$	(30,472	)	$	661,496		$	2,434,883


	Shareholders' Equity
	Common Stock Shares			Common Stock Par Value			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders’ Equity
	(in thousands)
For the Six Months Ended June 30, 2024
Balance, December 31, 2023		152,698		$	19,087		$	1,827,274		$	(26,978	)	$	706,514		$	2,525,897
Net issuance of common stock under stock-based plans		591			73			8,373									8,446
Stock-based compensation expense								30,818									30,818
Warrant exercises		8,812			1,102			(1,114	)								(12	)
Repurchase of common stock		(299	)		(37	)								(30,253	)		(30,290	)
Cash dividends ($0.12 per share)														(37,391	)		(37,391	)
Net income														250,470			250,470
Other comprehensive income (loss)											(17,126	)					(17,126	)
Balance, June 30, 2024		161,802		$	20,225		$	1,865,351		$	(44,104	)	$	889,340		$	2,730,812
For the Six Months Ended July 2, 2023
Balance, December 31, 2022		155,759		$	19,470		$	1,755,963		$	(49,868	)	$	725,729		$	2,451,294
Net issuance of common stock under stock-based plans		631			79			(3,782	)								(3,703	)
Stock-based compensation expense								32,409									32,409
Repurchase of common stock		(2,242	)		(280	)								(233,604	)		(233,884	)
Cash dividends ($0.11 per share)														(34,210	)		(34,210	)
Settlements of convertible notes		375			47			(47	)								—
Exercise of convertible notes hedge call options		(375	)		(47	)		47									—
Net income														203,581			203,581
Other comprehensive income (loss)											19,396						19,396
Balance, July 2, 2023		154,148		$	19,269		$	1,784,590		$	(30,472	)	$	661,496		$	2,434,883

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended
	June 30, 2024			July 2, 2023
	(in thousands)
Cash flows from operating activities:
Net income	$	250,470		$	203,581
Adjustments to reconcile net income from operations to net cash provided by operating activities:
Depreciation		48,927			45,231
Stock-based compensation		30,693			32,449
Losses (gains) on investments		13,090			(4,745	)
Provision for excess and obsolete inventory		9,438			11,341
Amortization		9,397			9,580
Gain on sale of business		(57,486	)		—
Deferred taxes		(16,830	)		(13,571	)
Retirement plan actuarial losses (gains)		(250	)		—
Other		1,240			(92	)
Changes in operating assets and liabilities
Accounts receivable		(54,211	)		(2,693	)
Inventories		17,102			(13,845	)
Prepayments and other assets		22,190			(29,584	)
Accounts payable and other liabilities		(53,009	)		(24,514	)
Deferred revenue and customer advances		2,739			(34,938	)
Retirement plans contributions		(2,774	)		(2,482	)
Income taxes		2,622			(13,614	)
Net cash provided by operating activities		223,348			162,104
Cash flows from investing activities:
Purchases of property, plant and equipment		(88,869	)		(80,702	)
Purchase of investment in a business		(524,653	)		—
Purchases of marketable securities		(27,757	)		(99,018	)
Proceeds from the sale of a business, net of cash and cash equivalents sold		87,172			—
Proceeds from maturities of marketable securities		26,858			21,997
Proceeds from sales of marketable securities		21,289			35,577
Proceeds from insurance		873			460
Net cash used for investing activities		(505,087	)		(121,686	)
Cash flows from financing activities:
Repayments of borrowings on revolving credit facility		(185,000	)		—
Dividend payments		(37,370	)		(34,184	)
Repurchase of common stock		(30,306	)		(227,845	)
Payments related to net settlement of employee stock compensation awards		(13,434	)		(20,308	)
Payments of convertible debt principal		—			(17,458	)
Proceeds from borrowings on revolving credit facility		185,000			—
Issuance of common stock under stock purchase and stock option plans		21,836			16,599
Net cash used for financing activities		(59,274	)		(283,196	)
Effects of exchange rate changes on cash and cash equivalents		5,346			1,213
Decrease in cash and cash equivalents		(335,667	)		(241,565	)
Cash and cash equivalents at beginning of period		757,571			854,773
Cash and cash equivalents at end of period	$	421,904		$	613,208
Non-cash investing activities:
Capital expenditures incurred but not yet paid:	$	3,124		$	1,741

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. THE COMPANY

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automated test equipment and robotics solutions. Teradyne designs, develops, manufactures and sells automated test systems and robotics products. Teradyne’s automated test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s robotics products include collaborative robotic arms, autonomous mobile robots, and advanced robotic control software used by global manufacturing, logistics and industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. Teradyne’s automated test equipment and robotics products and services include:

•

semiconductor test (“Semiconductor Test”) systems;

•

storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”);

•

wireless test (“Wireless Test”) systems; and

•

robotics (“Robotics”) products.

B. ACCOUNTING POLICIES

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. The December 31, 2023, condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by United States of America generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2024, for the year ended December 31, 2023.

Preparation of Financial Statements and Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates its estimates, including those related to inventories, investments, goodwill, intangible and other long-lived assets, accounts receivable, income taxes, deferred tax assets and liabilities, pensions, warranties, contingent consideration liabilities, and loss contingencies. Management bases its estimates on historical experience and on appropriate and customary assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ significantly from these estimates under different assumptions or conditions.

Equity Method Investments

The Company accounts for investments using the equity method of accounting when the Company has 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. The Company monitors on an ongoing basis its equity method investments for indicators of other-than-temporary declines in fair value below carrying value.

C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which will require Teradyne to disclose significant segment expenses and other segment items used by the Chief Operating Decision Maker ("CODM") on an annual and interim basis as well as provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, Teradyne will be required to disclose the title and position of the CODM. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU will have no impact on results of operations, cash flows or financial condition. Upon adoption, Teradyne will apply the amendments in this ASU retrospectively to all prior period disclosures presented in the financial statements.

In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires expanded disclosures relating to the tax rate reconciliation, income taxes paid, income (loss) before income tax expense (benefit) and income tax expense (benefit), requiring a greater disaggregation of information for each. The provisions of ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. The amendments in this update should be applied on a prospective basis, but retrospective application is permitted. This ASU will have no impact on results of operations, cash flows or financial condition.

D. REVENUE

Disaggregation of Revenue

The following table provides information about disaggregated revenue by timing of revenue recognition, primary geographical market, and major product lines.


		Semiconductor Test				System Test		Robotics				Wireless Test
		System on-a-Chip		Memory				Universal Robots		Mobile Industrial Robots				Total
	(in thousands)
For the Three Months Ended June 30, 2024 (1)
Timing of Revenue Recognition
Point in Time		$	343,536	$	121,662	$	43,519	$	72,722	$	15,495	$	32,273	$	629,207
Over Time			70,048		7,318		17,282		1,863		167		3,994		100,672
Total		$	413,584	$	128,980	$	60,801	$	74,585	$	15,662	$	36,267	$	729,879
Geographical Market
Asia Pacific		$	381,631	$	124,497	$	21,259	$	14,756	$	5,447	$	29,293	$	576,883
Americas			20,211		3,254		28,684		29,900		5,110		4,901		92,060
Europe, Middle East and Africa			11,742		1,229		10,858		29,929		5,105		2,073		60,936
Total		$	413,584	$	128,980	$	60,801	$	74,585	$	15,662	$	36,267	$	729,879

For the Three Months Ended July 2, 2023 (1)
Timing of Revenue Recognition
Point in Time		$	282,080	$	112,547	$	76,801	$	55,737	$	12,770	$	40,261	$	580,196
Over Time			72,614		7,467		17,471		2,116		1,011		3,562		104,241
Total		$	354,694	$	120,014	$	94,272	$	57,853	$	13,781	$	43,823	$	684,437
Geographical Market
Asia Pacific		$	303,062	$	115,250	$	41,644	$	14,883	$	2,291	$	22,362	$	499,492
Americas			32,191		4,286		40,163		22,832		6,086		19,491		125,049
Europe, Middle East and Africa			19,441		478		12,465		20,138		5,404		1,970		59,896


Massachusetts	04-2272148
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

600 Riverpark Drive, North Reading, Massachusetts	01864
(Address of Principal Executive Offices)	(Zip Code)


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Emerging growth company	☐

Smaller reporting company	☐


		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):	1

	Condensed Consolidated Balance Sheets as of June 30, 2024, and December 31, 2023	1
	f
	Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2024 and July 2, 2023	2

	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended June 30, 2024, and July 2, 2023	3

	Condensed Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2024, and July 2, 2023	4
	d
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024, and July 2, 2023	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39

Item 4.	Controls and Procedures	39

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	42

Item 6.	Exhibits	43


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


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