Teradyne Reports 50% Sequential Growth in Second Quarter 2015 Sales

• Q2’15 Revenue of $513 million, up 50% from Q1’15
• Orders up 8% from Q1’15
• Highest Wireless Test orders in eight quarters

NORTH READING, Mass.--(BUSINESS WIRE)-- Teradyne, Inc. (NYSE: TER):

			Q2’15			Q2’14			Q1’15
Orders (mil)			$529			$627			$490
Revenue (mil)			$513			$526			$342
Non-GAAP EPS			$0.53			$0.54			$0.17
GAAP EPS			$0.48			$0.47			$0.15

Teradyne, Inc. (NYSE: TER) reported revenue of $513 million for the second quarter of 2015 of which $400 million was in Semiconductor Test, $63 million in Wireless Test, $46 million in System Test and $4 million in Industrial Automation. Industrial Automation consists of Universal Robots’ results from June 12 through July 5, 2015. On a non-GAAP basis, Teradyne’s net income in the second quarter was $114.6 million, or $0.53 per diluted share, which excluded acquired intangible asset amortization and included the related tax impact on non-GAAP adjustments. GAAP net income for the second quarter was $102.9 million or $0.48 per share.

Orders in the second quarter of 2015 were $529 million of which $395 million were in Semiconductor Test, $84 million in Wireless Test, $45 million in System Test, and $5 million in Industrial Automation.

“We delivered strong sales and earnings growth in the second quarter driven by across the board strength in all business segments,” said CEO and President Mark Jagiela. “Our alignment to the strongest segments of the semiconductor test market, improving storage test shipments and seasonally strong wireless test demand combined to deliver a 29% operating margin in the second quarter, the highest in three years. In addition to the strength of our core test businesses, we are especially excited to welcome Universal Robots (UR) to Teradyne. UR enables us to quickly bring the power of advanced automation to our system and wireless test customers while providing Teradyne a powerful, long term growth driver serving the emerging collaborative robot market.”

“In line with our strategy to balance strong additions to Teradyne with direct capital returns, we paid $13 million in dividends and returned $82 million with the repurchase of 4.1 million shares in the second quarter,” said Jagiela.

Guidance for the third quarter of 2015 is revenue of $450 million to $480 million, with non-GAAP net income of $0.35 to $0.41 per diluted share and GAAP net income of $0.27 to $0.33 per diluted share. Non-GAAP guidance excludes acquired intangible asset amortization and includes the related tax impact on non-GAAP adjustments.

Webcast

A conference call to discuss the second quarter results, along with management's business outlook, will follow at 10 a.m. ET, Thursday, July 30. Interested investors should access the webcast at www.teradyne.com and click on "Investors" at least five minutes before the call begins. Presentation materials will be available starting at 10 a.m. ET. A replay will be available on the Teradyne website at www.teradyne.com/investors.

Non-GAAP Results

In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses non-GAAP results of operations that exclude certain income items and charges. These results are provided as a complement to results provided in accordance with GAAP. Non-GAAP income from operations and non-GAAP net income exclude acquired intangible asset amortization, fair value inventory step-up related to Universal Robots, retired CEO equity charge, non-cash convertible debt interest, discrete income tax adjustments, restructuring and other, and a gain from the sale of an equity investment. GAAP requires that these items be included in determining income from operations and net income. Non-GAAP income from operations, non-GAAP net income, non-GAAP income from operations and non-GAAP net income as a percentage of revenue, and non-GAAP net income per share are non-GAAP measures presented to provide meaningful supplemental information regarding Teradyne's baseline performance before gains, losses or other charges that may not be indicative of Teradyne’s current core business or future outlook. These non-GAAP measures are used to make operational decisions, to determine employee compensation, to forecast future operational results, and for comparison with Teradyne’s business plan, historical operating results and the operating results of Teradyne’s competitors. Non-GAAP gross margin excludes fair value inventory step-up related to Universal Robots. GAAP requires that this item be included in determining gross margin. Non-GAAP gross margin dollar amount and percentage are non-GAAP measures that management believes provide useful supplemental information for management and the investor. Management uses non-GAAP gross margin as a performance measure for Teradyne’s current core business and future outlook and for comparison with Teradyne’s business plan, historical gross margin results and the gross margin results of Teradyne’s competitors. Prior to September 29, 2014, non-GAAP diluted shares included the impact of Teradyne’s call option and warrant on its shares. Management believes each of these non-GAAP measures provides useful supplemental information for investors, allowing greater transparency to the information used by management in its operational decision making and in the review of Teradyne’s financial and operational performance, as well as facilitating meaningful comparisons of Teradyne’s results in the current period compared with those in prior and future periods. A reconciliation of each available GAAP to non-GAAP financial measure discussed in this press release is contained in the attached exhibits and on the Teradyne website at www.teradyne.com by clicking on "Investors" and then selecting the "GAAP to Non-GAAP Reconciliation" link. The non-GAAP financial measures discussed in this press release may not be comparable to similarly titled measures used by other companies. The presentation of non-GAAP measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP.

About Teradyne

Teradyne (NYSE:TER) is a leading supplier of automation solutions for test and industrial applications. Teradyne Automatic Test Equipment (ATE) is used to test semiconductors, wireless products, data storage and complex electronic systems, which serve consumer, communications, industrial and government customers. Our Industrial Automation solutions include Collaborative Robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency. In 2014, Teradyne had revenue of $1.65 billion and currently employs approximately 4,000 people worldwide. For more information, visit www.teradyne.com. Teradyne (R) is a registered trademark of Teradyne, Inc. in the U.S. and other countries.

Safe Harbor Statement

This release contains forward-looking statements regarding future business prospects, Teradyne’s results of operations, market conditions, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program and a senior secured credit facility. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, future events, future payment of dividends, future repurchases of common stock or future availability of, or borrowing under, a credit facility. There can be no assurance that management’s estimates of Teradyne’s future results or other forward-looking statements will be achieved. Additionally, the current dividend and share repurchase programs may be modified, suspended or discontinued at any time. Important factors that could cause actual results, dividend payments, repurchases of common stock or borrowings under the credit facility to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand; market acceptance of new products; the ability to grow Universal Robots’ business; increased research and development spending; deterioration of Teradyne’s financial condition; the business judgment of the board of directors that a declaration of a dividend, the repurchase of common stock or debt under the credit facility is not in the company’s best interests; and other events, factors and risks disclosed in filings with the SEC, including, but not limited to, the “Risk Factors” section of Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and the Quarterly Report on Form 10-Q for the period ended April 5, 2015. The forward-looking statements provided by Teradyne in this press release represent management’s views as of the date of this release. Teradyne anticipates that subsequent events and developments may cause management's views to change. However, while Teradyne may elect to update these forward-looking statements at some point in the future, Teradyne specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Teradyne's views as of any date subsequent to the date of this release.

TERADYNE, INC. REPORT FOR SECOND FISCAL QUARTER OF 2015
CONDENSED CONSOLIDATED OPERATING STATEMENTS
(In thousands, except per share amounts)
						Quarter Ended												Six Months Ended
						July 5, 2015				April 5, 2015				June 29, 2014				July 5, 2015				June 29, 2014
Net revenues						$	512,739			$	342,401			$	525,567			$	855,140			$	846,577
		Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)					214,171				149,978				235,154				364,149				389,117
Gross profit							298,568				192,423				290,413				490,991				457,460
Operating expenses:
		Engineering and development					75,832				71,450				73,414				147,282				140,499
		Selling and administrative (2)					77,073				72,041				77,489				149,114				155,492
		Acquired intangible asset amortization					15,258				13,808				18,271				29,066				36,542
		Restructuring and other (3)					(385	)			-				572				(385	)			572
				Operating expenses			167,778				157,299				169,746				325,077				333,105
Income from operations							130,790				35,124				120,667				165,914				124,355
		Interest and other (4)					1,346				7,314				725				8,660				(4,836	)
Income before income taxes							132,136				42,438				121,392				174,574				119,519
		Income tax provision					29,257				9,651				20,187				38,908				17,385
Net income						$	102,879			$	32,787			$	101,205			$	135,666			$	102,134
Net income per common share:
Basic						$	0.48			$	0.15			$	0.52			$	0.63			$	0.53
Diluted						$	0.48			$	0.15			$	0.47			$	0.62			$	0.45
Weighted average common shares - basic							213,845				217,187				194,408				215,516				193,860
Weighted average common shares - diluted (5)							215,496				218,812				216,568				217,154				226,526
Cash dividend declared per common share						$	0.06			$	0.06			$	-			$	0.12			$	0.06
Net orders						$	528,693			$	490,357			$	627,088			$	1,019,050			$	1,076,914
(1)		Cost of revenues includes:				Quarter Ended												Six Months Ended
						July 5, 2015				April 5, 2015				June 29, 2014				July 5, 2015				June 29, 2014
				Provision for excess and obsolete inventory		$	14,441			$	1,440			$	5,032			$	15,881			$	15,071
				Sale of previously written down inventory			(2,745	)			(1,931	)			(2,014	)			(4,676	)			(3,394	)
				Inventory step-up			595				-				-				595				-
						$	12,291			$	(491	)		$	3,018			$	11,800			$	11,677
(2)		For the six months ended June 29, 2014, selling and administrative expenses include an equity charge of $6,598 for the modification of Teradyne's retired CEO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his January 31, 2014 retirement.
(3)		Restructuring and other consists of:				Quarter Ended												Six Months Ended
						July 5, 2015				April 5, 2015				June 29, 2014				July 5, 2015				June 29, 2014
				Acquisition costs (a)		$	960			$	-			$	-			$	960			$	-
				Employee severance			255				-				572				255				572
				Contingent consideration fair value adjustment			(1,600	)			-				-				(1,600	)			-
						$	(385	)		$	-			$	572				(385	)		$	572
		(a)	Costs related to Universal Robots acquisition. The results of Universal Robots are included in Teradyne’s results starting June 12, 2015.
(4)		Interest and other includes:				Quarter Ended												Six Months Ended
						July 5, 2015				April 5, 2015				June 29, 2014				July 5, 2015				June 29, 2014
				Gain from the sale of an equity investment		$	(624	)		$	(4,782	)		$	-			$	(5,406	)		$	-
				Non-cash convertible debt interest expense			-				-				-				-				4,290
						$	(624	)		$	(4,782	)		$	-			$	(5,406	)		$	4,290
(5)		Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the six months ended June 29, 2014, 20.1 million shares have been included in diluted shares.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
						July 5, 2015				December 31, 2014
Assets
		Cash and cash equivalents				$	300,685			$	294,256
		Marketable securities					452,040				533,787
		Accounts receivable					296,654				151,034
		Inventories, net					121,817				105,129
		Deferred tax assets					58,345				57,239
		Prepayments					80,249				95,819
		Other current assets					6,596				6,582
				Total current assets			1,316,386				1,243,846
		Net property, plant and equipment					291,929				329,038
		Marketable securities					275,882				470,789
		Deferred tax assets					6,836				7,494
		Other assets					13,364				10,419
		Retirement plans assets					13,850				12,896
		Intangible assets, net					279,126				190,600
		Goodwill					495,434				273,438
				Total assets		$	2,692,807			$	2,538,520
Liabilities
		Accounts payable				$	86,463			$	47,763
		Accrued employees' compensation and withholdings					94,544				100,994
		Deferred revenue and customer advances					77,347				71,603
		Other accrued liabilities					85,470				48,647
		Contingent consideration					15,947				3,350
		Accrued income taxes					43,163				20,049
				Total current liabilities			402,934				292,406
		Long-term deferred revenue and customer advances					25,354				19,929
		Retirement plans liabilities					107,557				108,460
		Deferred tax liabilities					38,624				23,315
		Long-term other accrued liabilities					24,468				15,430
		Long-term contingent consideration					19,648				-
				Total liabilities			618,585				459,540
Shareholders' equity							2,074,222				2,078,980
				Total liabilities and shareholders' equity		$	2,692,807			$	2,538,520
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
						Quarter Ended								Six Months Ended
						July 5, 2015				June 29, 2014				July 5, 2015				June 29, 2014
Cash flows from operating activities:
		Net income				$	102,879			$	101,205			$	135,666			$	102,134
		Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation				16,885				18,526				36,230				33,785
			Amortization				16,256				19,065				31,395				42,990
			Stock-based compensation				7,442				8,297				15,405				23,530
			Provision for excess and obsolete inventory				14,441				5,032				15,881				15,071
			Gain from the sale of an equity investment				(624	)			-				(5,406	)			-
			Deferred taxes				(8,540	)			(8,753	)			(10,371	)			(5,697	)
			Non cash charge for the sale of inventories revalued at the date of acquisition				595				-				595				-
			Contingent consideration adjustment				(1,600	)			-				(1,600	)			-
			Tax benefit related to stock options and restricted stock units				(892	)			(1,671	)			(892	)			(1,671	)
			Other				2,571				1,306				1,154				1,165
			Changes in operating assets and liabilities, net of business acquired:
				Accounts receivable			(117,744	)			(84,243	)			(142,493	)			(143,125	)
				Inventories			17,540				15,834				23,500				18,469
				Prepayments and other assets			10,908				27,874				14,054				27,000
				Accounts payable and accrued expenses			73,542				88,394				53,392				52,796
				Deferred revenue and customer advances			4,647				4,168				5,685				13,800
				Retirement plans contributions			(980	)			(963	)			(1,999	)			(2,388	)
				Accrued income taxes			18,599				15,104				23,261				5,495
Net cash provided by operating activities							155,925				209,175				193,457				183,354
Cash flows from investing activities:
		Purchases of property, plant and equipment					(24,961	)			(60,192	)			(46,110	)			(91,389	)
		Purchases of available-for-sale marketable securities					(254,615	)			(266,046	)			(590,250	)			(523,306	)
		Proceeds from maturities of available-for-sale marketable securities					91,194				97,114				231,416				377,436
		Proceeds from sales of available-for-sale marketable securities					482,761				51,455				631,400				152,818
		Acquisition of business, net of cash acquired					(282,332	)			-				(282,332	)			-
		Proceeds from the sale of an equity investment					624				-				5,406				-
		Proceeds from life insurance					-				-				1,098				4,391
Net cash provided by (used for) investing activities							12,671				(177,669	)			(49,372	)			(80,050	)
Cash flows from financing activities:
		Issuance of common stock under stock option and stock purchase plans					8,979				478				17,878				10,643
		Repurchase of common stock					(81,666	)			-				(128,316	)			-
		Tax benefit related to stock options and restricted stock units					892				1,671				892				1,671
		Dividend payments					(12,808	)			(11,656	)			(25,857	)			(11,656	)
		Payment of debt issue costs					(2,253	)			-				(2,253	)			-
		Payment of long-term debt					-				-				-				(190,975	)
Net cash used for financing activities							(86,856	)			(9,507	)			(137,656	)			(190,317	)
Increase (decrease) in cash and cash equivalents							81,740				21,999				6,429				(87,013	)
Cash and cash equivalents at beginning of period							218,945				232,626				294,256				341,638
Cash and cash equivalents at end of period						$	300,685			$	254,625			$	300,685			$	254,625

GAAP to Non-GAAP Earnings Reconciliation
(In millions, except per share amounts)
						Quarter Ended
						July 5, 2015				% of Net Revenues														April 5, 2015				% of Net Revenues											June 29, 2014				% of Net Revenues
Net revenues						$	512.7																	$	342.4														$	525.6
Gross profit - GAAP						$	298.6				58.2	%												$	192.4			56.2	%										$	290.4			55.3	%
		Inventory Step-Up					0.6				0.1	%													-			-												-			-
Gross profit - non-GAAP						$	299.2				58.4	%												$	192.4			56.2	%										$	290.4			55.3	%
Income from operations - GAAP						$	130.8				25.5	%												$	35.1			10.3	%										$	120.7			23.0	%
		Acquired intangible asset amortization					15.3				3.0	%													13.8			4.0	%											18.3			3.5	%
		Restructuring and other (1)					(0.4	)			-0.1	%													-			-												0.6			0.1	%
		Inventory step-up					0.6				0.1	%													-			-												-			-
Income from operations - non-GAAP						$	146.3				28.5	%												$	48.9			14.3	%										$	139.6			26.6	%
																Net Income per Common Share															Net Income per Common Share															Net Income per Common Share
						July 5, 2015				% of Net Revenues						Basic				Diluted				April 5, 2015				% of Net Revenues			Basic				Diluted				June 29, 2014				% of Net Revenues			Basic				Diluted
Net income - GAAP						$	102.9				20.1	%				$	0.48			$	0.48			$	32.8			9.6	%		$	0.15			$	0.15			$	101.2			19.3	%		$	0.52			$	0.47
		Acquired intangible asset amortization					15.3				3.0	%					0.07				0.07				13.8			4.0	%			0.06				0.06				18.3			3.5	%			0.09				0.08
		Interest and other (2)					(0.6	)			-0.1	%					(0.00	)			(0.00	)			(4.8	)		-1.4	%			(0.02	)			(0.02	)			-			-				-				-
		Restructuring and other (1)					(0.4	)			-0.1	%					(0.00	)			(0.00	)			-			-				-				-				0.6			0.1	%			0.00				0.00
		Inventory step-up					0.6				0.1	%					0.00				0.00				-			-				-				-				-			-				-				-
		Exclude discrete tax adjustments (3)					0.2				0.0	%					0.00				0.00				(1.8	)		-0.5	%			(0.01	)			(0.01	)			(0.5	)		-0.1	%			(0.00	)			(0.00	)
		Tax effect of non-GAAP adjustments					(3.4	)			-0.7	%					(0.02	)			(0.02	)			(2.4	)		-0.7	%			(0.01	)			(0.01	)			(3.2	)		-0.6	%			(0.02	)			(0.01	)
Net income - non-GAAP						$	114.6				22.4	%				$	0.54			$	0.53			$	37.6			11.0	%		$	0.17			$	0.17			$	116.4			22.1	%		$	0.60			$	0.54
GAAP and non-GAAP weighted average common shares - basic							213.8																		217.2															194.4
GAAP and non-GAAP weighted average common shares - diluted							215.5																		218.8															216.6
(1)		Restructuring and other consists of:
						Quarter Ended
						July 5, 2015																		April 5, 2015															June 29, 2014
			Acquisition costs			$	1.0																	$	-														$	-
			Employee severance				0.2																		-															0.6
			Contingent consideration fair value adjustment				(1.6	)																	-															-
						$	(0.4	)																$	-														$	0.6
(2)		For the quarters ended July 5, 2015 and April 5, 2015, Interest and other included a gain from the sale of an equity investment.
(3)		For the quarters ended July 5, 2015, April 5, 2015 and June 29, 2014, adjustment to exclude discrete income tax items.
						Six Months Ended
						July 5, 2015				% of Net Revenues														June 29, 2014				% of Net Revenues
Net Revenues						$	855.1																	$	846.6
Gross profit - GAAP						$	491.0				57.4	%												$	457.5			54.0	%
		Inventory step-up					0.6				0.1	%													-			-
Gross profit - non-GAAP						$	491.6				57.5	%												$	457.5			54.0	%
Income from operations - GAAP						$	165.9				19.4	%												$	124.4			14.7	%
		Acquired intangible asset amortization					29.1				3.4	%													36.5			4.3	%
		Restructuring and other (1)					(0.4	)			0.0	%													0.6			0.1	%
		Inventory step-up					0.6				0.1	%													-			-
		Equity modification charge (2)					-				-														6.6			0.8	%
Income from operations - non-GAAP						$	195.2				22.8	%												$	168.1			19.9	%
																Net Income per Common Share															Net Income per Common Share
						July 5, 2015				% of Net Revenues						Basic				Diluted				June 29, 2014				% of Net Revenues			Basic				Diluted
Net income - GAAP						$	135.7				15.9	%				$	0.63			$	0.62			$	102.1			12.1	%		$	0.53			$	0.45
		Acquired intangible asset amortization					29.1				3.4	%					0.14				0.13				36.5			4.3	%			0.19				0.16
		Interest and other (3)					(5.4	)			-0.6	%					(0.03	)			(0.02	)			4.3			0.5	%			0.02				0.02
		Restructuring and other (1)					(0.4	)			0.0	%					(0.00	)			(0.00	)			0.6			0.1	%			0.00				0.00
		Inventory step-up					0.6				0.1	%					0.00				0.00				-			-				-				-
		Equity modification charge (2)					-				-						-				-				6.6			0.8	%			0.03				0.03
		Exclude discrete tax adjustments (4)					(1.6	)			-0.2	%					(0.01	)			(0.01	)			(2.9	)		-0.3	%			(0.01	)			(0.01	)
		Tax effect of non-GAAP adjustments					(5.8	)			-0.7	%					(0.03	)			(0.03	)			(8.5	)		-1.0	%			(0.04	)			(0.04	)
		Convertible share adjustment (5)					-				-						-				-				-			-				-				0.04
Net income - non-GAAP						$	152.2				17.8	%				$	0.71			$	0.70			$	138.7			16.4	%		$	0.72			$	0.65
GAAP and non-GAAP weighted average common shares - basic							215.5																		193.9
GAAP weighted average common shares - diluted							217.2																		226.5
		Exclude dilutive shares from convertible note					-																		(10.0	)
Non-GAAP weighted average common shares - diluted (5)							217.2																		216.5
(1)		Restructuring and other consists of:
						Six Months Ended
						July 5, 2015																		June 29, 2014
			Acquisition costs			$	1.0																	$	-
			Employee severance				0.2																		0.6
			Contingent consideration fair value adjustment				(1.6	)																	-
						$	(0.4	)																$	0.6
(2)		For the six months ended June 29, 2014, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CEO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his January 31, 2014 retirement.
(3)		For the six months ended July 5, 2015, Interest and other included a gain from the sale of an equity investment. For the six months ended June 29, 2014, Interest and other included non-cash convertible debt interest expense.
(4)		For the six months ended July 5, 2015 and June 29, 2014, adjustment to exclude discrete income tax items.
(5)		For the six months ended June 29, 2014. the calculation of non-GAAP diluted earnings per share gives benefit to the Company's call option on its stock for 34.7 million shares at $5.48. As a result, 10.0 million shares have been included in non-GAAP diluted shares and net interest expense of $2.0 million has been added back to non-GAAP net income for the non-GAAP diluted earnings per share calculation.
GAAP to Non-GAAP Reconciliation of Third Quarter 2015 guidance:
GAAP and non-GAAP third quarter revenue guidance:										$450 million				to		$480 million
GAAP net income per diluted share										$	0.27					$	0.33
		Exclude acquired intangible asset amortization									0.09						0.09
		Exclude inventory step-up amortization									0.00						0.00
		Tax effect of non-GAAP adjustment									(0.02	)					(0.02	)
Non-GAAP net income per diluted share										$	0.35					$	0.41

For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150729006753/en/

Teradyne, Inc.
Andy Blanchard, 978-370-2425
Vice President of Corporate Relations

Source: Teradyne, Inc.