Table of Contents
false0000097210Q2--12-31truehttp://fasb.org/us-gaap/2023#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrentIncludes $1.3 million and $1.9 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.”Includes $2.5 million and $4.2 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside ASC 606 “Revenue from Contracts with Customers.”Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, legal and environmental fees, severance charges, pension, and an expense for the modification of Teradyne’s former chief executive officer’s outstanding equity awards.Included in income (loss) before taxes are charges related to restructuring and other, and inventory charges.Total assets are attributable to each segment. 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIO
N
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2023
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
to
    
    
    
    
Commission File
No. 001-06462
 
 
TERADYNE, INC.
(Exact name of registrant as specified in its charter)
 
 
 
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)
978-370-2700
(Registrant’s Telephone Number, Including Area Code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.125
per share
 
TER
 
Nasdaq Stock Market LLC
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 the 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in
Rule 12b-2
of the Exchange Act (check one):
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Emerging growth company  
       
Smaller reporting 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 Section 13(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 outstanding of the registrant’s only class of Common Stock as of July 31, 2023
,
was 154,013,736 shares.





TERADYNE, INC.
INDE
X
 
        
Page No.
 
  
Item 1.
  Financial Statements (Unaudited):      1  
  Condensed Consolidated Balance Sheets as of July 2, 2023 and December 31, 2022      1  
  Condensed Consolidated Statements of Operations for the Three and Six Months ended July 2, 2023 and July 3, 2022      2  
  Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended July 2, 2023 and July 3, 2022      3  
  Condensed Statements of Convertible Common Shares and Shareholders’ Equity for the Three and Six Months Ended July 2, 2023 and July 3, 2022      4  
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 2, 2023 and July 3, 2022      5  
  Notes to Condensed Consolidated Financial Statements      6  
Item 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations      28  
Item 3.
  Quantitative and Qualitative Disclosures about Market Risk      37  
Item 4.
  Controls and Procedures      38  
  
Item 1.
  Legal Proceedings      38  
Item 1A.
  Risk Factors      38  
Item 2.
  Unregistered Sales of Equity Securities and Use of Proceeds      39  
Item 4.
  Mine Safety Disclosures      39  
Item 5.
  Other Information     
39
 
Item 6.
  Exhibits      40  

PART I
 
Item 1:
Financial Statements
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
  
July 2,

2023
 
 
December 31,
2022
 
 
  
 
 
 
 
 
 
  
(in thousands,
except per share amount)
 
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 613,208     $ 854,773  
Marketable securities
     95,199       39,612  
Accounts receivable, less allowance for credit losses of $2,232 and $1,955 at July 2, 2023 and December 31, 2022, respectively
     493,234       491,145  
Inventories, net
     347,295       325,019  
Prepayments
     560,682       532,962  
Other current assets
     14,222       14,404  
    
 
 
   
 
 
 
Total current assets
     2,123,840       2,257,915  
Property, plant and equipment, net
     437,077       418,683  
Operating lease
right-of-use
assets, net
     75,889       73,734  
Marketable securities
     104,685       110,777  
Deferred tax assets
     152,471       142,784  
Retirement plans assets
     11,514       11,761  
Other assets
     32,699       28,925  
Acquired intangible assets, net
     44,611       53,478  
Goodwill
     412,110       403,195  
    
 
 
   
 
 
 
Total assets
   $ 3,394,896     $ 3,501,252  
    
 
 
   
 
 
 
LIABILITIES
                
Current liabilities:
                
Accounts payable
   $ 153,157     $ 139,722  
Accrued employees’ compensation and withholdings
     163,653       212,266  
Deferred revenue and customer advances
     120,085       148,285  
Other accrued liabilities
     114,435       112,271  
Operating lease liabilities
     20,212       18,594  
Income taxes payable
     65,437       65,010  
Current debt
     32,806       50,115  
    
 
 
   
 
 
 
Total current liabilities
     669,785       746,263  
Retirement plans liabilities
     124,040       116,005  
Long-term deferred revenue and customer advances
     38,999       45,131  
Long-term other accrued liabilities
     16,475       15,981  
Deferred tax liabilities
     1,304       3,267  
Long-term operating lease liabilities
     65,079       64,176  
Long-term incomes taxes payable
     44,331       59,135  
    
 
 
   
 
 
 
Total liabilities
     960,013       1,049,958  
    
 
 
   
 
 
 
Commitments and contingencies (Note P)
            
SHAREHOLDERS’ EQUITY
                
Common stock, $0.125 par value, 1,000,000 shares authorized; 154,148 and 155,759 shares issued and outstanding at July 2, 2023 and December 31, 2022, respectively
     19,269       19,470  
Additional
paid-in
capital
     1,784,590       1,755,963  
Accumulated other comprehensive loss
     (30,472     (49,868
Retained earnings
     661,496       725,729  
    
 
 
   
 
 
 
Total shareholders’ equity
     2,434,883       2,451,294  
    
 
 
   
 
 
 
Total liabilities and shareholders’ equity
  
$
3,394,896
 
 
$
3,501,252
 


  
 
 
 
 
 
 
 
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, 2022, are an integral part of the condensed consolidated financial statements.
 
1

Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
 
  
For the Three Months

Ended
 
 
For the Six Months

Ended
 
 
  
July 2,
2023
 
 
July 3,
2022
 
 
July 2,

2023
 
 
July 3,

2022
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
(in thousands, except per share amount)
 
Revenues:
                                
Products
   $ 540,375     $ 697,954     $ 1,013,793     $ 1,323,829  
Services
     144,062       142,812       288,173       272,307  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
     684,437       840,766       1,301,966       1,596,136  
Cost of revenues:
                                
Cost of products
     217,011       274,674       415,675       517,690  
Cost of services
     64,934       59,703       127,379       117,124  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)
     281,945       334,377       543,054       634,814  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
     402,492       506,389       758,912       961,322  
Operating expenses:
                                
Selling and administrative
     145,695       139,533       296,650       279,718  
Engineering and development
     105,706       111,951       211,468       220,067  
Acquired intangible assets amortization
     4,825       4,871       9,627       9,934  
Restructuring and other
     6,358       2,044       8,395       17,758  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     262,584       258,399       526,140       527,477  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income from operations
     139,908       247,990       232,772       433,845  
Non-operating
(income) expense:
                                
Interest income
     (6,354     (951     (11,613     (1,653
Interest expense
     1,045       913       2,031       1,925  
Other (income) expense, net
     815       9,436       868       14,622  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income before income taxes
     144,402       238,592       241,486       418,951  
Income tax provision
     24,352       40,805       37,905       59,236  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income
   $ 120,050     $ 197,787     $ 203,581     $ 359,715  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income per common share:
                                
Basic
   $ 0.78     $ 1.24     $ 1.31     $ 2.24  
    
 
 
   
 
 
   
 
 
   
 
 
 
Diluted
   $ 0.73     $ 1.16     $ 1.23     $ 2.07  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares—basic
     154,760       159,563       155,332       160,805  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares—diluted
     164,751       171,159       165,530       173,367  
    
 
 
   
 
 
   
 
 
   
 
 
 
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, 2022, are an integral part of the condensed consolidated financial statements.
 
2

Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
 
  
For the Three Months

Ended
 
 
For the Six Months

Ended
 
 
  
July 2,
2023
 
 
July 3,
2022
 
 
July 2,
2023
 
 
July 3,
2022
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
(in thousands)
 
Net income
   $ 120,050     $ 197,787     $ 203,581     $ 359,715  
Other comprehensive income, net of tax:
                                
Foreign currency translation adjustment, net of tax of $0, $0, $0, $0, respectively
     2,943       (29,230     12,250       (37,307
Available-for-sale
marketable securities:
                                
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(180), $(1,240), $323, and $(2,573), respectively
     (568     (4,522     1,726       (9,910
Less: Reclassification adjustment for losses included in net income, net of tax of $8, $77, $10,
$59, respectively
     28       274       33       209  
    
 
 
   
 
 
   
 
 
   
 
 
 
       (540     (4,248     1,759       (9,701
Cash flow hedges:
                                
Unrealized gains arising during period, net
of 
tax of $920, $0, $1,088, $
0
respectively
     3,270       —         3,866       —    
Less: Reclassification adjustment for losses included in net income, net of tax of $91, $0, $428, $0 respectively
     323       —         1,524       —    
    
 
 
   
 
 
   
 
 
   
 
 
 
       3,593       —         5,390       —    
Defined benefit post-retirement plan:
                                
Amortization of prior service credit, net of tax of $0, $0, $(1), $(1), respectively
     (2     (2     (3     (3
    
 
 
   
 
 
   
 
 
   
 
 
 
Other comprehensive income (loss)
     5,994       (33,480     19,396       (47,011
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income
   $ 126,044     $ 164,307     $ 222,977     $ 312,704  
    
 
 
   
 
 
   
 
 
   
 
 
 
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, 2022, are an integral part of the condensed consolidated financial statements.
 
3

Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE COMMON SHARES
AND SHAREHOLDERS’ EQUITY
(Unaudited)
 
 
  
 
 
 
Shareholders’ Equity
 
 
  
Convertible
Common
Shares
Value
 
 
Common
Stock Shares
 
 
Common
Stock Par
Value
 
 
Additional
Paid-in

Capital
 
 
Accumulated
Other
Comprehensive
(Loss) Income
 
 
Retained
Earnings
 
 
Total
Shareholders’
Equity
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
(in thousands)
 
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
  
 
 
 
 
 
5,994
 
 
 
 
5,994
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 2, 2023
  
$
—  
 
 
 
154,148
 
 
$
19,269
 
 
$
1,784,590
 
 
$
(30,472
 
$
661,496
 
 
$
2,434,883
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended July 3, 2022
  
 
 
 
 
 
 
Balance, April 3, 2022
  
$
—  
 
 
 
161,053
 
 
$
20,132
 
 
$
1,711,690
 
 
$
(19,479
 
$
762,189
 
 
$
2,474,532
 
Net issuance of common stock under stock-based plans
  
 
 
33
 
 
 
4
 
 
 
(1,675
 
 
 
 
(1,671
Stock-based compensation expense
  
 
 
 
 
11,658
 
 
 
 
 
11,658
 
Repurchase of common stock
  
 
 
(3,206
 
 
(401
 
 
 
 
(333,933
 
 
(334,334
Cash dividends ($0.11 per share)
  
 
 
 
 
 
 
(17,561
 
 
(17,561
Settlements of convertible notes
  
 
 
495
 
 
 
62
 
 
 
(149
 
 
 
 
(87
Exercise of convertible notes hedge call options
  
 
 
(495
 
 
(62
 
 
62
 
 
 
 
 
—  
 
Cumulative-effect of change in accounting principle related to convertible debt
  
 
 
 
 
 
 
1,752
 
 
 
1,752
 
Net income
  
 
 
 
 
 
 
197,787
 
 
 
197,787
 
Other comprehensive loss
  
 
 
 
 
 
(33,480
 
 
 
(33,480
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 3, 2022
  
$
—  
 
 
 
157,880
 
 
$
19,735
 
 
$
1,721,586
 
 
$
(52,959
 
$
610,234
 
 
$
2,298,596
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 ($0.22 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
  
 
 
 
 
 
19,396
 
 
 
 
19,396
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 2, 2023
  
$
—  
 
 
 
154,148
 
 
$
19,269
 
 
$
1,784,590
 
 
$
(30,472
 
$
661,496
 
 
$
2,434,883
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended July 3, 2022
  
 
 
 
 
 
 
Balance, December 31, 2021
  
$
1,512
 
 
 
162,251
 
 
$
20,281
 
 
$
1,811,545
 
 
$
(5,948
 
$
736,566
 
 
$
2,562,444
 
Net issuance of common stock under stock-based plans
  
 
 
585
 
 
 
73
 
 
 
(16,318
 
 
 
 
(16,245
Stock-based compensation expense
  
 
 
 
 
25,862
 
 
 
 
 
25,862
 
Repurchase of common stock
  
 
 
(4,956
 
 
(619
 
 
 
 
(545,179
 
 
(545,798
Cash dividends ($0.22 per share)
  
 
 
 
 
 
 
(35,470
 
 
(35,470
Settlements of convertible notes
  
 
 
1,004
 
 
 
125
 
 
 
(306
 
 
 
 
(181
Exercise of convertible notes hedge call options
  
 
 
(1,004
 
 
(125
 
 
125
 
 
 
 
 
—  
 
Cumulative-effect of change in accounting principle related to convertible debt
  
 
(1,512
 
 
 
 
(99,322
 
 
 
94,602
 
 
 
(4,720
Net income
  
 
 
 
 
 
 
359,715
 
 
 
359,715
 
Other comprehensive loss
  
 
 
 
 
 
(47,011
 
 
 
(47,011
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, July 3, 2022
  
$
—  
 
 
 
157,880
 
 
$
19,735
 
 
$
1,721,586
 
 
$
(52,959
 
$
610,234
 
 
$
2,298,596
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2022, are an integral part of the condensed consolidated financial statements.
 
4

Table of Contents
TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
 
  
For the Six Months Ended
 
 
  
July 2,

2023
 
 
July 3,

2022
 
 
  
 
 
 
 
 
 
  
(in thousands)
 
Cash flows from operating activities:
                
Net income
   $ 203,581     $ 359,715  
Adjustments to reconcile net income from operations to net cash provided by operating activities:
                
Depreciation
     45,231       44,460  
Stock-based compensation
     32,449       25,122  
Provision for excess and obsolete inventory
     11,341       6,695  
Amortization
     9,580       10,095  
Deferred taxes
     (13,571     (23,597
(Gains) losses on investments
     (4,745     8,973  
Other
     (92     522  
Changes in operating assets and liabilities
                
Accounts receivable
     (2,693     (146,384
Inventories
     (13,845     (46,682
Prepayments and other assets
     (29,584     (94,751
Accounts payable and other liabilities
     (24,514     (43,611
Deferred revenue and customer advances
     (34,938     14,163  
Retirement plans contributions
     (2,482     (2,618
Income taxes
     (13,614     10,815  
    
 
 
   
 
 
 
Net cash provided by operating activities
     162,104       122,917  
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchases of property, plant and equipment
     (80,702     (89,743
Purchases of marketable securities
     (99,018     (247,881
Proceeds from sales of marketable securities
     35,577       143,642  
Proceeds from maturities of marketable securities
     21,997       139,652  
Proceeds from life insurance
     460       —    
    
 
 
   
 
 
 
Net cash used for investing activities
     (121,686     (54,330
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Repurchase of common stock
     (227,845     (532,799
Dividend payments
     (34,184     (35,442
Payments related to net settlement of employee stock compensation awards
     (20,308     (32,780
Payments of convertible debt principal
     (17,458     (42,292
Issuance of common stock under stock purchase and stock option plans
     16,599       16,536  
    
 
 
   
 
 
 
Net cash used for financing activities
     (283,196     (626,777
    
 
 
   
 
 
 
Effects of exchange rate changes on cash and cash equivalents
     1,213       8,014  
    
 
 
   
 
 
 
Decrease in cash and cash equivalents
     (241,565     (550,176
Cash and cash equivalents at beginning of period
     854,773       1,122,199  
    
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 613,208     $ 572,023  
    
 
 
   
 
 
 
Non-cash
investing activities:
                
Capital expenditures incurred but not yet paid:
   $ 1,741     $ 1,855  
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, 2022, are an integral part of the condensed consolidated financial statements.
 
5

Table of Contents
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 automatic test systems and robotics products. Teradyne’s automatic 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 and autonomous mobile robots (“AMRs”) 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 automatic 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. Certain prior year amounts may have been reclassified to conform to the current year presentation. The December 31, 2022 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, 2023, for the year ended December 31, 2022.
Preparation of Financial Statements and Use of Estimates
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosures 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 judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the
COVID-19
pandemic, there has been uncertainty and disruption in the global economy and our markets. 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.
C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For the six months ended July 2, 2023, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Teradyne’s consolidated financial statements.
 
6

Table of Contents
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
 
  
 
 
  
Robotics
 
  
 
 
  
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
  
System
on-a-Chip
 
  
Memory
 
  
System
Test
 
  
Universal
Robots
 
  
Mobile
Industrial
Robots
 
  
Wireless

Test
 
  
Corporate

and

Eliminations
 
 
Total
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
  
(in thousands)
 
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  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 354,694     $ 120,014     $ 94,272     $ 57,853     $ 13,781     $ 43,823     $ —       $ 684,437  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the Three Months Ended July 3, 2022 (1)
                                                               
Timing of Revenue Recognition
                                                               
Point in Time
  $ 395,211     $ 74,790     $ 118,692     $ 80,409     $ 17,801     $ 60,765     $ (193   $ 747,475  
Over Time
    64,253       7,094       16,010       2,104       741       3,089       —         93,291  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 459,464     $ 81,884     $ 134,702     $ 82,513     $ 18,542     $ 63,854     $ (193   $ 840,766  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical Market
                                                               
Asia Pacific
  $ 413,537     $ 78,996     $ 95,584     $ 17,357     $ 5,317     $ 44,106     $ —       $ 654,897  
Americas
    28,714       2,552       33,409       27,732       7,229       17,460       (193     116,903  
Europe, Middle East and Africa
    17,213       336       5,709       37,424       5,996       2,288       —         68,966  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 459,464     $ 81,884     $ 134,702     $ 82,513     $ 18,542     $ 63,854     $ (193   $ 840,766  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the Six Months Ended July 2, 2023 (2)
                                                               
Timing of Revenue Recognition
                                                               
Point in Time
  $ 555,354     $ 173,805     $ 133,658     $ 125,760     $ 28,735     $ 75,624     $ —       $ 1,092,937  
Over Time
    146,173       14,384       35,245       4,124       2,229       6,874       —         209,029  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 701,528     $ 188,189     $ 168,903     $ 129,884     $ 30,964     $ 82,498     $ —       $ 1,301,966  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical Market
                                                               
Asia Pacific
  $ 586,321     $ 178,945     $ 81,234     $ 28,100     $ 3,793     $ 45,593     $ —       $ 923,986  
Americas
    73,759       7,230       69,143       43,273       17,898       32,337       —         243,640  
Europe, Middle East and Africa
    41,448       2,014       18,526       58,511       9,273       4,568       —         134,340  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 701,528     $ 188,189     $ 168,903     $ 129,884     $ 30,964     $ 82,498     $ —       $ 1,301,966  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the Six Months Ended July 3, 2022 (2)
                                                               
Timing of Revenue Recognition
                                                               
Point in Time
  $ 718,666     $ 163,513     $ 223,981     $ 163,591     $ 34,545     $ 109,194     $ (539   $ 1,412,951  
Over Time
    127,382       14,127       29,390       4,206       1,902       6,178       —         183,185  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 846,048     $ 177,640     $ 253,371     $ 167,797     $ 36,447     $ 115,372     $ (539   $ 1,596,136  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical Market
                                                               
Asia Pacific
  $ 754,277     $ 172,147     $ 169,369     $ 35,978     $ 7,909     $ 79,052     $ —       $ 1,218,732  
Americas
    58,428       4,598       70,017       55,880       15,793       27,147       (539     231,324  
Europe, Middle East and Africa
    33,343       895       13,985       75,939       12,745       9,173       —         146,080  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $ 846,048     $ 177,640     $ 253,371     $ 167,797     $ 36,447     $ 115,372     $ (539   $ 1,596,136  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
Includes $1.3 million and $1.9 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606
“Revenue from Contracts with Customers.”
(2)
Includes $2.5 million and $4.2 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside ASC 606
“Revenue from Contracts with Customers.”
 
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Table of Contents
Contract Balances
During the three and six months ended July 2, 2023, Teradyne recognized $27.3 million and $68.4 million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. During the three and six months ended July 3, 2022, Teradyne recognized $25.1 million and $60.2 
million, respectively, that was included within the deferred revenue and customer advances balances at the beginning of the period. This revenue primarily relates to undelivered hardware, extended warranties, training, application support, and post contract support. Each of these represents a distinct performance obligation. As of July 2, 2023, Teradyne
had $
1,271.6
 million of unsatisfied performance obligations. Teradyne expects to recognize
 
approximately
 
90
% of the remaining performance obligations in the next
12
months and
the remainder
in
1-3
years.
Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:

 
 
  
July 2,
 
  
December 31,
 
 
  
2023
 
  
2022
 
 
  
 
 
  
 
 
 
  
(in thousands)
 
Maintenance, service and training
   $ 68,282      $ 78,089  
Customer advances, undelivered elements and other
     46,380        59,147  
Extended warranty
     44,422        56,180  
    
 
 
    
 
 
 
Total deferred revenue and customer advances
   $ 159,084      $ 193,416  
    
 
 
    
 
 
 
Accounts Receivable
During the three and six months ended July 2, 2023 and July 3, 2022, Teradyne sold certain trade accounts receivables on a
non-recourse
basis to third-party financial institutions pursuant to factoring agreements. During the three months ended July 2, 2023 and July 3, 2022, total trade accounts receivable sold under the factoring agreements were $59.3 million and $37.6 million, respectively. During the six months ended July 2, 2023 and July 3, 2022, total trade account
s
receivable sold under the factoring agreements were $93.5 million and $57.1 million
, respectively
. Factoring fees for the sales of receivables were recorded in interest expense and were not material. Teradyne accounted for these transactions as sales of receivables and presented cash proceeds as cash provided by operating activities in the consolidated statements of cash flows.
E. INVENTORIES
Inventories, net consisted of the following at July 2, 2023 and December 31, 2022:

 
 
  
July 2,

2023
 
  
December 31,

2022
 
 
  
 
 
  
 
 
 
  
(in thousands)
 
Raw material
   $ 250,422      $ 256,065  
Work-in-process
     43,685        37,982  
Finished goods
     53,188        30,972  
    
 
 
    
 
 
 
     $ 347,295      $ 325,019  
    
 
 
    
 
 
 
Inventory reserves at July 2, 2023 and December 31, 2022 were $140.3 million and $136.8 million, respectively.
F. FINANCIAL INSTRUMENTS
Cash Equivalents
Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.
Marketable Securities
Teradyne’s equity and debt mutual funds are classified as Level 1 and
available-for-sale
debt securities are classified as Level 2. Contingent consideration is classified as Level 3. The vast majority of Level 2 securities are fixed income securities priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.
During the three and six months ended July 2, 2023 and July 3, 2022, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.

 
8

Table of Contents
Realized gains recorded in the three and six months ended July 2, 2023
,
were $
0.1
 million and $
0.4
 million, respectively. Realized gains recorded in the three and six months ended July 3, 2022
,
were $
0.1
 million and $
0.5
 million, respectively. Realized losses recorded in the three and six months ended July 2, 2023
,
were $
0.2
 million. Realized losses recorded in the three and six months ended July 3, 2022
,
were $
0.4
 million and $
0.6
 million, respectively. Realized gains and losses are included in other (income) expense, net.
Unrealized gains on equity securities recorded in the three and six months ended July 2, 2023
,
were $2.6 million and $4.6 million, respectively. No unrealized gains on equity securities were recorded in the three and six months ended July 3, 2022. No unrealized losses on equity securities were recorded in the three and six months ended July 2, 2023. Unrealized losses on equity securities recorded in the three and six months ended July 3, 2022
,
were $6.6 million and $8.8 million, respectively. Unrealized gains and losses on equity securities are included in other (income) expense, net.
Unrealized gains and losses on
available-for-sale
debt securities are included in accumulated other comprehensive income (loss) on the balance sheet.
The cost of securities sold is based on average cost.
The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of July 2, 2023 and December 31, 2022.
 
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Table of Contents
 
  
July 2, 2023
 
 
  
Quoted
Prices

in Active

Markets for

Identical

Instruments

(Level 1)
 
  
Significant

Other

Observable

Inputs

(Level 2)
 
  
Significant

Unobservable

Inputs

(Level 3)
 
  
Total
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
(in thousands)
 
Assets
                                   
Cash
   $ 311,803      $ —        $ —        $ 311,803  
Cash equivalents
     290,548        10,857        —          301,405  
Available-for-sale
securities:
                                   
U.S. Treasury securities
     —          52,238        —          52,238  
Corporate debt securities
     —          51,608        —          51,608  
Commercial paper
     —          30,882        —          30,882  
Debt mutual funds
     7,739        —          —          7,739  
Certificates of deposit and time deposits
     —          6,699        —          6,699  
U.S. government agency securities
     —          6,475        —          6,475  
Non-U.S.
government securities
     —          544        —          544  
Equity securities:
                                   
Mutual funds
     43,699        —          —          43,699  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 653,789      $ 159,303      $ —        $ 813,092  
Derivative assets
     —          5,819        —          5,819  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 653,789      $ 165,122      $ —        $ 818,911  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
                                   
Derivative liabilities
   $ —        $ 994      $ —        $ 994  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ —        $ 994      $ —        $ 994  
    
 
 
    
 
 
    
 
 
    
 
 
 
         
Reported as follows:                                    
    
(Level 1)
    
(Level 2)
    
(Level 3)
    
Total
 
                             
    
(in thousands)
 
Assets
                                   
Cash and cash equivalents
   $ 602,351      $ 10,857      $ —        $ 613,208  
Marketable securities
     —          95,199        —          95,199  
Long-term marketable securities
     51,438        53,247        —          104,685  
Prepayments
     —          5,819        —          5,819  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 653,789      $ 165,122      $ —        $ 818,911  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
     .                             
Other current liabilities
   $ —        $ 994      $ —        $ 994  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ —        $ 994      $ —        $ 994  
    
 
 
    
 
 
    
 
 
    
 
 
 

10

Table of Contents
    
December 31, 2022
 
    
Quoted 

Prices

in Active

Markets for

Identical

Instruments

(Level 1)

    
Significant

Other

Observable

Inputs

(Level 2)
    
Significant

Unobservable

Inputs

(Level 3)
    
Total
 
                             
    
(in thousands)
 
Assets
                                   
Cash
   $ 632,417      $ —        $ —        $ 632,417  
Cash equivalents
     161,767        60,589        —          222,356  
Available-for-sale
securities:
                                —    
Corporate debt securities
     —          50,856        —          50,856  
U.S. Treasury securities
     —          39,649        —          39,649  
Commercial paper
     —          7,159        —          7,159  
Debt mutual funds
     6,580        —          —          6,580  
U.S. government agency securities
     —          6,352        —          6,352  
Certificates of deposit and time deposits
     —          1,740        —          1,740  
Non-U.S.
government securities
     —          535        —          535  
Equity securities:
                                   
Mutual Funds
     37,518        —          —          37,518  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 838,282      $ 166,880      $ —        $ 1,005,162  
Derivative assets
     —          86        —          86  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 838,282      $ 166,966      $ —        $ 1,005,248  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
                                   
Derivative liabilities
     —          4,215        —          4,215  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ —        $ 4,215      $ —        $ 4,215  
    
 
 
    
 
 
    
 
 
    
 
 
 
Reported as follows:
 
  
(Level 1)
 
  
(Level 2)
 
  
(Level 3)
 
  
Total
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
(in thousands)
 
Assets
                                   
Cash and cash equivalents
   $
 
 
794,184      $ 60,589      $ —        $ 854,773  
Marketable securities
     —           39,612                   —          39,612  
Long-term marketable securities
     44,098        66,679        —          110,777  
Prepayments
     —          86        —          86  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 838,282      $
 
166,966      $ —        $ 1,005,248