0001193125-23-136994 10-Q 104 20230402 20230505 20230505 TERADYNE, INC 0000097210 3825 042272148 MA 1231 10-Q 34 001-06462 23893342 600 RIVERPARK DRIVE NORTH READING MA 01864 978-370-2700 600 RIVERPARK DRIVE NORTH READING MA 01864 TERADYNE INC 19920703 10-Q 1 d489720d10q.htm 10-Q 10-Q
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false0000097210Q1--12-31Includes $1.3 million and $2.3 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers.” Incremental shares from assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price, multiplied by the number of convertible notes shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period. Convertible notes hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price, multiplied by the number of warrant shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period. Total assets are attributable to each segment. Corporate assets consist of cash and cash equivalents, marketable securities, and certain other assets. Included in Corporate and Eliminations are: interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, legal and environmental fees, severance charges, acquisition related charges and compensation 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. 0000097210 2023-01-01 2023-04-02 0000097210 2023-04-02 0000097210 2022-12-31 0000097210 2022-01-01 2022-04-03 0000097210 2022-04-03 0000097210 2022-01-01 2022-12-31 0000097210 2021-12-31 0000097210 2016-12-12 2016-12-12 0000097210 2023-01-31 0000097210 2020-05-01 0000097210 2022-10-05 0000097210 2023-05-01 0000097210 2023-01-01 2023-01-01 0000097210 2022-08-16 2022-08-16 0000097210 2023-01-01 0000097210 us-gaap:CashEquivalentsMember us-gaap:FairValueMeasurementsRecurringMember 2022-12-31 0000097210 us-gaap:FairValueInputsLevel3Member 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 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 May 1, 2023 was
155,038,743
shares.
 
 


Table of Contents

TERADYNE, INC.

INDEX

 

         Page No.  
PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements (Unaudited):

  
 

Condensed Consolidated Balance Sheets as of April 2, 2023 and December 31, 2022

     1  
 

Condensed Consolidated Statements of Operations for the Three Months ended April 2, 2023 and April 3, 2022

     2  
 

Condensed Consolidated Statements of Comprehensive Income for the Three Months ended April 2, 2023 and April 3, 2022

     3  
 

Condensed Statements of Convertible Common Shares and Shareholders’ Equity for the Three Months Ended April 2, 2023 and April 3, 2022

     4  
 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 2, 2023 and April 3, 2022

     5  
 

Notes to Condensed Consolidated Financial Statements

     6  

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     26  

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

     32  

Item 4.

 

Controls and Procedures

     33  
PART II. OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

     33  

Item 1A.

 

Risk Factors

     33  

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     34  

Item 4.

 

Mine Safety Disclosures

     34  

Item 6.

 

Exhibits

     35  


Table of Contents
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PART I
 
Item 1:
Financial Statements
TERADYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
    
April 2,
2023
   
December 31,
2022
 
    
 
   
 
 
    
(in thousands,
except per share amount)
 
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 649,208     $ 854,773  
Marketable securities
     92,895       39,612  
Accounts receivable, less allowance for credit losses of $1,973 and $1,955 at April 2, 2023 and December 31, 2022, respectively
     455,334       491,145  
Inventories, net
     352,058       325,019  
Prepayments
     549,114       532,962  
Other current assets
     13,367       14,404  
    
 
 
   
 
 
 
Total current assets
     2,111,976       2,257,915  
Property, plant and equipment, net
     432,381       418,683  
Operating lease
right-of-use
assets, net
     74,939       73,734  
Marketable securities
     116,938       110,777  
Deferred tax assets
     148,527       142,784  
Retirement plans assets
     11,650       11,761  
Other assets
     27,922       28,925  
Acquired intangible assets, net
     49,246       53,478  
Goodwill
     409,828       403,195  
    
 
 
   
 
 
 
Total assets
   $ 3,383,407     $ 3,501,252  
    
 
 
   
 
 
 
LIABILITIES
                
Current liabilities:
                
Accounts payable
   $ 142,382     $ 139,722  
Accrued employees’ compensation and withholdings
     119,433       212,266  
Deferred revenue and customer advances
     119,355       148,285  
Other accrued liabilities
     114,739       112,271  
Operating lease liabilities
     19,985       18,594  
Income taxes payable
     77,089       65,010  
Current debt
     35,109       50,115  
    
 
 
   
 
 
 
Total current liabilities
     628,092       746,263  
Retirement plans liabilities
     121,303       116,005  
Long-term deferred revenue and customer advances
     41,797       45,131  
Long-term other accrued liabilities
     16,211       15,981  
Deferred tax liabilities
     2,325       3,267  
Long-term operating lease liabilities
     65,082       64,176  
Long-term incomes taxes payable
     59,135       59,135  
    
 
 
   
 
 
 
Total liabilities
     933,945       1,049,958  
    
 
 
   
 
 
 
Commitments and contingencies (Note P)
                
SHAREHOLDERS’ EQUITY
                
Common stock, $0.125 par value, 1,000,000 shares authorized; 155,445 and 155,759 shares issued and outstanding at April 2, 2023 and December 31, 2022, respectively
     19,431       19,470  
Additional
paid-in
capital
     1,772,352       1,755,963  
Accumulated other comprehensive loss
     (36,466     (49,868
Retained earnings
     694,145       725,729  
    
 
 
   
 
 
 
Total shareholders’ equity
     2,449,462       2,451,294  
    
 
 
   
 
 
 
Total liabilities and shareholders’ equity
   $ 3,383,407     $ 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

TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
                 
    
For the Three Months

Ended
 
    
April 2,
   
April 3,
 
    
2023
   
2022
 
    
 
   
 
 
    
(in thousands, except per share
amount)
 
Revenues:
                
Products
   $ 473,418     $ 625,875  
Services
     144,111       129,495  
    
 
 
   
 
 
 
Total revenues
     617,529       755,370  
Cost of revenues:
                
Cost of products
     198,665       243,016  
Cost of services
     62,444       57,421  
    
 
 
   
 
 
 
Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)
     261,109       300,437  
    
 
 
   
 
 
 
Gross profit
     356,420       454,933  
Operating expenses:
                
Selling and administrative
     150,955       140,185  
Engineering and development
     105,762       108,116  
Acquired intangible assets amortization
     4,802       5,063  
Restructuring and other
     2,037       15,714  
    
 
 
   
 
 
 
Total operating expenses
     263,556       269,078  
    
 
 
   
 
 
 
Income from operations
     92,864       185,855  
Non-operating
(income) expense:
                
Interest income
     (5,258     (703
Interest expense
     987       1,012  
Other (income) expense, net
     51       5,187  
    
 
 
   
 
 
 
Income before income taxes
     97,084       180,359  
Income tax provision
     13,553       18,431  
    
 
 
   
 
 
 
Net income
   $ 83,531     $ 161,928  
    
 
 
   
 
 
 
Net income per common share:
                
Basic
   $ 0.54     $ 1.00  
    
 
 
   
 
 
 
Diluted
   $ 0.50     $ 0.92  
    
 
 
   
 
 
 
Weighted average common shares—basic
     155,904       162,048  
    
 
 
   
 
 
 
Weighted average common shares—diluted
     166,308       175,575  
    
 
 
   
 
 
 
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

TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
    
For the Three Months

Ended
 
    
April 2,
   
April 3,
 
    
2023
   
2022
 
    
 
   
 
 
    
(in thousands)
 
Net income
   $ 83,531     $ 161,928  
Other comprehensive income
 (loss)
, net of tax:
                
Foreign currency translation adjustment, net of tax of $0 and $0, respectively
     9,309       (8,076
Available-for-sale
marketable securities:
                
Unrealized gains (losses) on marketable securities arising during period, net of tax of $503 and $(1,333), respectively
     2,294       (5,388
Less: Reclassification adjustment for losses (gains) included in net income, net of tax of $2 and $(18), respectively
     5       (65
    
 
 
   
 
 
 
       2,299       (5,453
Cash flow hedges:
                
Unrealized gains arising during period, net
of
tax of $167, $0, respectively
     596           
Less: Reclassification adjustment for losses included in net income, net of tax of $338 and $0, respectively
     1,200           
    
 
 
   
 
 
 
       1,796           
Defined benefit post-retirement plan:
                
Amortization of prior service credit, net of tax of $0 and $0, respectively
     (2     (2
    
 
 
   
 
 
 
Other comprehensive income (loss)
     13,402       (13,531
    
 
 
   
 
 
 
Comprehensive income
   $ 96,933     $ 148,397  
    
 
 
   
 
 
 
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
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 April 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
             579       73       (3,943                     (3,870
Stock-based compensation expense
                             20,332                       20,332  
Repurchase of common stock
             (893     (112                     (97,936     (98,048
Cash dividends ($0.11 per share)
                                             (17,179     (17,179
Settlements of convertible notes
             324       41       (41                         
Exercise of convertible notes hedge call options
             (324     (41     41                           
Net income
                                             83,531       83,531  
Other comprehensive income
                                     13,402               13,402  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance, April 2, 2023
   $          155,445     $ 19,431     $ 1,772,352     $ (36,466   $ 694,145     $ 2,449,462  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the Three Months Ended April 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
             552       70       (14,644                     (14,574
Stock-based compensation expense
                             14,204                       14,204  
Repurchase of common stock
             (1,750     (219                     (211,247     (211,466
Cash dividends ($0.11 per share)
                                             (17,908     (17,908
Settlements of convertible notes
             509       64       (157                     (93
Exercise of convertible notes hedge call options
             (509     (64     64                           
Cumulative-effect of change in accounting principle related to convertible debt
     (1,512                     (99,322             92,850       (6,472
Net income
                                             161,928       161,928  
Other comprehensive loss
                                     (13,531             (13,531
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance, April 3, 2022
   $          161,053     $ 20,132     $ 1,711,690     $ (19,479   $ 762,189     $ 2,474,532  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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

TERADYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    
For the Three Months Ended
 
    
April 2,
   
April 3,
 
    
2023
   
2022
 
    
 
   
 
 
    
(in thousands)
 
Cash flows from operating activities:
                
Net income
   $ 83,531     $ 161,928  
Adjustments to reconcile net income from operations to net cash provided by operating activities:
                
Depreciation
     22,680       22,503  
Stock-based compensation
     18,885       12,894  
Provision for excess and obsolete inventory
     5,610       1,590  
Amortization
     4,926       5,233  
Deferred taxes
     (7,634     11,288  
(Gains) losses on investments
     (2,238     2,001  
Other
     108       177  
Changes in operating assets and liabilities
                
Accounts receivable
     37,204       208  
Inventories
     (23,697     (9,480
Prepayments and other assets
     (15,380     (74,305
Accounts payable and other accrued expenses
     (83,208     (124,382
Deferred revenue and customer advances
     (32,705     6,747  
Retirement plan contributions
     (1,234     (1,329
Income taxes
     12,488       (7,611
    
 
 
   
 
 
 
Net cash provided by operating activities
     19,336       7,462  
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchases of property, plant and equipment
     (41,444     (43,999
Purchases of marketable securities
     (69,276     (165,977
Proceeds from sales of marketable securities
     7,929       30,581  
Proceeds from maturities of marketable securities
     7,468       96,682  
Proceeds from life insurance
     460           
    
 
 
   
 
 
 
Net cash used for investing activities
     (94,863     (82,713
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Issuance of common stock under stock purchase and stock option plans
     15,997       16,475  
Repurchase of common stock
     (93,308     (201,465
Payments related to net settlement of employee stock compensation awards
     (19,870     (31,048
Dividend payments
     (17,165     (17,895
Payments of convertible debt principal
     (15,155     (20,694
    
 
 
   
 
 
 
Net cash used for financing activities
     (129,501     (254,627
    
 
 
   
 
 
 
Effects of exchange rate changes on cash and cash equivalents
     (537     2,282  
    
 
 
   
 
 
 
Decrease in cash and cash equivalents
     (205,565     (327,596
Cash and cash equivalents at beginning of period
     854,773       1,122,199  
    
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 649,208     $ 794,603  
    
 
 
   
 
 
 
Non-cash
investing activities:
                
Capital expenditures incurred but not yet paid:
   $ 3,823     $ 2,500  
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

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 three months ended April 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

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 April 2, 2023 (1)
                                                                      
Timing of Revenue Recognition
                                                                      
Point in Time
   $ 273,275      $ 61,258      $ 56,857      $ 70,029      $ 15,959      $ 35,363      $        $ 512,741  
Over Time
     73,559        6,917        17,774        2,008        1,218        3,312        —         104,788  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Total
   $ 346,834      $ 68,175      $ 74,631      $ 72,037      $ 17,177      $ 38,675      $        $ 617,529  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Geographical Market
                                                                      
Asia Pacific
   $ 283,259      $ 63,695      $ 39,590      $ 13,217      $ 1,502      $ 23,231      $ —       $ 424,494  
Americas
     41,568        2,944        28,980        20,447        11,806        12,846                 118,591  
Europe, Middle East and Africa
     22,007        1,536        6,061        38,373        3,869        2,598        —         74,444  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Total
   $ 346,834      $ 68,175      $ 74,631      $ 72,037      $ 17,177      $ 38,675      $        $ 617,529  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
For the Three Months Ended April 3, 2022 (1)
                                                                      
Timing of Revenue Recognition
                                                                      
Point in Time
   $ 323,456      $ 88,723      $ 105,288      $ 83,182      $ 16,744      $ 48,429      $ (346   $ 665,476  
Over Time
     63,129        7,033        13,380        2,102        1,161        3,089        —         89,894  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Total
   $ 386,585      $ 95,756      $ 118,668      $ 85,284      $ 17,905      $ 51,518      $ (346   $ 755,370  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Geographical Market
                                                                      
Asia Pacific
   $ 340,741      $ 93,151      $ 73,784      $ 18,621      $ 2,592      $ 34,946      $ —       $ 563,835  
Americas
     29,714        2,046        36,608        28,148        8,564        9,687        (346     114,421  
Europe, Middle East and Africa
     16,130        559        8,276        38,515        6,749        6,885        —         77,114  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Total
   $ 386,585      $ 95,756      $ 118,668      $ 85,284      $ 17,905      $ 51,518      $ (346   $ 755,370  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
 
(1)
Includes $1.3 million and $2.3 million in 2023 and 2022, respectively, for leases of Teradyne’s systems recognized outside Accounting Standards Codification (“ASC”) 606
“Revenue from Contracts with Customers.”
Contract Balances
During the three months ended April 2, 2023 and April 3, 2022, Teradyne recognized $50.7 million and $35.0 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 April 2, 2023, Teradyne had $1,240.7 million of unsatisfied performance obligations. Teradyne expects to recognize 88% of the remaining performance obligations in the next 12 months and 12% 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:
 
    
April 2, 2023
    
December 31, 2022
 
    
 
    
 
 
    
(in thousands)
 
Maintenance, service and training
   $ 70,609      $ 78,089  
Extended warranty
     49,343        56,180  
Customer advances, undelivered elements and other
     41,200        59,147  
    
 
 
    
 
 
 
Total deferred revenue and customer advances
   $ 161,152      $ 193,416  
    
 
 
    
 
 
 
 
7

Accounts Receivable
During the three months ended April 2, 2023 and April 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 April 2, 2023 and April 3, 2022, total trade accounts receivable sold under the factoring agreements were $34.2 million and $19.4 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 April 2, 2023 and December 31, 2022:
 
    
April 2, 2023
    
December 31, 2022
 
    
 
    
 
 
    
(in thousands)
 
Raw material
   $ 264,035      $ 256,065  
Work-in-process
     43,987        37,982  
Finished goods
     44,036        30,972  
    
 
 
    
 
 
 
     $ 352,058      $ 325,019  
    
 
 
    
 
 
 
Inventory reserves at April 2, 2023 and December 31, 2022 were $138.6 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 months ended April 2, 2023 and April 3, 2022, there were no transfers in or out of Level 1, Level 2, or Level 3 financial instruments.
Realized gains recorded in the three months ended April 2, 2023 and April 3, 2022 were $0.3 million and $0.4 million, respectively. Realized losses recorded in the three months ended April 2, 2023 and April 3, 2022 were $0.1 million and $0.2 million, respectively. Realized gains and losses are included in other (income) expense, net.
Unrealized gains on equity securities recorded in the three months ended April 2, 2023 were $2.0 million. Unrealized losses on equity securities recorded in the three months ended April 3, 2022 were $2.2 million. 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 April 2, 2023 and December 31, 2022.
 
8

    
April 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
   $ 244,542      $         $         $ 244,542  
Cash equivalents
     252,374        152,292                  404,666  
Available-for-sale
securities:
                                   
U.S. Treasury securities
               52,168                  52,168  
Corporate debt securities
               51,369                  51,369  
Commercial paper
               47,548                  47,548  
U.S. government agency securities
               7,394                  7,394  
Debt mutual funds
     6,800                            6,800  
Certificates of deposit and time deposits
               1,754                  1,754  
Non-U.S.
government securities
               554                  554  
Equity securities:
                                   
Mutual funds
     42,246                            42,246  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 545,962      $ 313,079      $         $ 859,041  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
                                   
Derivative liabilities
   $         $ 1,980      $         $ 1,980  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $         $ 1,980      $         $ 1,980  
    
 
 
    
 
 
    
 
 
    
 
 
 
Reported as follows:
 
    
(Level 1)
    
(Level 2)
    
(Level 3)
    
Total
 
                             
    
(in thousands)
 
Assets
                                   
Cash and cash equivalents
   $ 496,916      $ 152,292      $         $ 649,208  
Marketable securities
               92,895                  92,895  
Long-term marketable securities
     49,046        67,892                  116,938  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 545,962      $ 313,079      $         $ 859,041  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
                                   
Other current liabilities
   $         $ 1,980      $         $ 1,980  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $         $ 1,980      $         $ 1,980  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
9
    
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  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 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  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
                                   
Other current liabilities
   $         $ 4,215      $         $ 4,215  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $         $ 4,215      $         $ 4,215  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
The carrying amounts and fair values of Teradyne’s financial instruments at April 2, 2023 and December 31, 2022 were as follows:
 
    
April 2, 2023
    
December 31, 2022
 
    
Carrying Value
    
Fair Value
    
Carrying Value
    
Fair Value
 
                             
    
(in thousands)
 
Assets
                                   
Cash and cash equivalents
   $ 649,208      $ 649,208      $ 854,773      $ 854,773  
Marketable securities
     209,833        209,833        150,389        150,389  
Derivative assets
                         86        86  
Liabilities
                                   
Derivative liabilities
     1,980        1,980        4,215        4,215  
Convertible debt
     35,109        119,586        50,115        139,007  
 
10

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.
The following table summarizes the composition of
available-for-sale
marketable securities at April 2, 2023:
 
    
April 2, 2023
 
    
Available-for-Sale
        
    
Cost
    
Unrealized

Gain
    
Unrealized

(Loss)
   
Fair Market

Value
    
Fair Market

Value of

Investments

with Unrealized

Losses
 
                                   
    
(in thousands)
 
U.S. Treasury securities
   $ 55,615      $ 38      $ (3,485   $ 52,168      $ 49,669  
Corporate debt securities
     56,040        41        (4,712