Teradyne Reports Third Quarter 2020 Results

 


                        
GAAP to Non-GAAP Earnings Reconciliation              
                         
(In millions, except per share amounts)                       
           Quarter Ended            
   September 27,
2020
  % of Net
Revenues
      June 28,
2020
  % of Net
Revenues
      September 29,
2019
  % of Net
Revenues
    
                         
Net revenues$819.5        $838.7        $582.0       
                                       
Gross profit GAAP $ 458.9       56.0 %           $ 471.5     56.2 %           $ 345.0     59.3 %        
  Inventory step-up   0.1       0.0 %             0.1     0.0 %             -     -          
Gross profit non-GAAP $ 459.0       56.0 %           $ 471.6     56.2 %           $ 345.0     59.3 %        
                                                 
Income from operations - GAAP $ 269.7       32.9 %           $ 217.9     26.0 %           $ 154.9     26.6 %        
  Restructuring and other (1)   (27.7 )     -3.4 %             37.2     4.4 %             (6.5 )   -1.1 %        
  Acquired intangible assets amortization   6.2       0.8 %             8.9     1.1 %             9.6     1.6 %        
  Inventory step-up   0.1       0.0 %             0.1     0.0 %             -     -          
  Equity modification charge (2)   -       -               -     -               2.1     0.4 %        
Income from operations - non-GAAP $ 248.3       30.3 %           $ 264.1     31.5 %           $ 160.1     27.5 %        
                                                 
            Net Income
per Common Share
          Net Income
per Common Share
          Net Income
per Common Share
    September 27,
2020
  % of Net
Revenues
  Basic   Diluted   June 28,
2020
  % of Net
Revenues
  Basic   Diluted   September 29,
2019
  % of Net
Revenues
  Basic   Diluted
Net income - GAAP $ 222.7       27.2 %   $ 1.34     $ 1.21     $ 188.9     22.5 %   $ 1.14     $ 1.05     $ 135.9     23.4 %   $ 0.80     $ 0.75  
  Restructuring and other (1)   (27.7 )     -3.4 %     (0.17 )     (0.15 )     37.2     4.4 %     0.22       0.21       (6.5 )   -1.1 %     (0.04 )     (0.04 )
  Acquired intangible assets amortization   6.2       0.8 %     0.04       0.03       8.9     1.1 %     0.05       0.05       9.6     1.6 %     0.06       0.05  
  Interest and other (3)   3.6       0.4 %     0.02       0.02       3.6     0.4 %     0.02       0.02       3.5     0.6 %     0.02       0.02  
  Pension mark-to-market adjustment (3)   2.7       0.3 %     0.02       0.01       (0.1 )   -0.0 %     (0.00 )     (0.00 )     -     -       -       -  
  Inventory step-up   0.1       0.0 %     0.00       0.00       0.1     0.0 %     0.00       0.00       -     -       -       -  
  Equity modification charge (2)   -       -       -       -       -     -       -       -       2.1     0.4 %     0.01       0.01  
  Exclude discrete tax adjustments (4)   (4.4 )     -0.5 %     (0.03 )     (0.02 )     (1.1 )   -0.1 %     (0.01 )     (0.01 )     (7.7 )   -1.3 %     (0.05 )     (0.04 )
  Non-GAAP tax adjustments   2.2       0.3 %     0.01       0.01       (8.3 )   -1.0 %     (0.05 )     (0.05 )     (3.5 )   -0.6 %     (0.02 )     (0.02 )
  Convertible share adjustment (5)   -       -       -       0.06       -     -       -       0.06       -     -       -       0.02  
Net income - non-GAAP $ 205.4       25.1 %   $ 1.24     $ 1.18     $ 229.2     27.3 %   $ 1.38     $ 1.33     $ 133.4     22.9 %   $ 0.79     $ 0.77  
                                                 
GAAP and non-GAAP weighted average common shares - basic   166.0                   165.8                   169.6              
GAAP weighted average common shares - diluted   184.3                   180.3                   180.5              
  Exclude dilutive shares related to convertible note transaction   (9.2 )                 (7.6 )                 (5.8 )            
Non-GAAP weighted average common shares - diluted   175.2                   172.7                   174.7              
                                                 
(1 ) Restructuring and other consists of:                                              
    Quarter Ended            
    September 27,
2020
              June 28,
2020
              September 29,
2019
           
  Contingent consideration fair value adjustment $ (27.2 )               $ 29.3                 $ (7.8 )            
  Acquisition related expenses and compensation   (1.1 )                 3.1                   0.5              
  Employee severance   0.5                   -                   0.8              
  Contract termination settlement fee   -                   4.0                   -              
  Other   0.1                   0.8                   -              
    $ (27.7 )               $ 37.2                 $ (6.5 )            
                                                 
(2 ) For the quarter ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.                
                                                 
(3 ) For the quarters ended September 27, 2020, June 28, 2020, and September 29, 2019, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended September 27, 2020 and June 28, 2020, adjustment to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.          
                                                 
(4 ) For the quarters ended September 27, 2020, June 28, 2020, and September 29, 2019, adjustment to exclude discrete income tax items.          
                                                 
(5 ) For the quarters ended September 27, 2020 and June 28, 2020, the non-GAAP diluted EPS calculation adds back $1.3 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 7.8 million and 5.8 million shares, respectively, related to the convertible debt hedge transaction.          
                                                 
    Nine Months Ended                
    September 27,
2020
  % of Net
Revenues
          September 29,
2019
  % of Net
Revenues
                       
                                                 
Net revenues $ 2,362.5                 $ 1,640.3                              
                                                 
Gross profit GAAP $ 1,336.0       56.6 %           $ 956.6     58.3 %                        
  Inventory step-up   0.4       0.0 %             0.4     0.0 %                        
Gross profit non-GAAP $ 1,336.4       56.6 %           $ 957.0     58.3 %                        
                                                 
Income from operations - GAAP $ 694.3       29.4 %           $ 382.0     23.3 %                        
  Acquired intangible assets amortization   25.1       1.1 %             30.4     1.9 %                        
  Restructuring and other (1)   1.9       0.1 %             (11.8 )   -0.7 %                        
  Inventory step-up   0.4       0.0 %             0.4     0.0 %                        
  Equity modification charge (2)   -       -               2.1     0.1 %                        
Income from operations - non-GAAP $ 721.7       30.5 %           $ 403.1     24.6 %                        
                                                 
            Net Income
per Common Share
          Net Income
per Common Share
               
    September 27,
2020
  % of Net
Revenues
  Basic   Diluted   September 29,
2019
  % of Net
Revenues
  Basic   Diluted                
Net income - GAAP $ 587.8       24.9 %   $ 3.54     $ 3.23     $ 342.4     20.9 %   $ 2.00     $ 1.92                  
  Acquired intangible assets amortization   25.1       1.1 %     0.15       0.14       30.4     1.9 %     0.18       0.17                  
  Interest and other (3)   10.8       0.5 %     0.07       0.06       10.2     0.6 %     0.06       0.06                  
  Pension mark-to-market adjustments (3)   2.6       0.1 %     0.02       0.01       0.4     0.0 %     0.00       0.00                  
  Restructuring and other (1)   1.9       0.1 %     0.01       0.01       (11.8 )   -0.7 %     (0.07 )     (0.07 )                
  Inventory step-up   0.4       0.0 %     0.00       0.00       0.4     0.0 %     0.00       0.00                  
  Equity modification charge (2)   -       -       -       -       2.1     0.1 %     0.01       0.01                  
  Exclude discrete tax adjustments (4)   (13.1 )     -0.6 %     (0.08 )     (0.07 )     (23.9 )   -1.5 %     (0.14 )     (0.13 )                
  Non-GAAP tax adjustments   (8.0 )     -0.3 %     (0.05 )     (0.04 )     (9.0 )   -0.5 %     (0.05 )     (0.05 )                
  Convertible share adjustment (5)   -       -       -       0.16       -     -       -       0.06                  
Net income - non-GAAP $ 607.5       25.7 %   $ 3.66     $ 3.52     $ 341.2     20.8 %   $ 1.99     $ 1.97                  
                                                 
GAAP and non-GAAP weighted average common shares - basic   166.1                   171.5                              
GAAP weighted average common shares - diluted   181.8                   178.7                              
  Exclude dilutive shares from convertible note   (8.0 )                 (5.9 )                            
Non-GAAP weighted average common shares - diluted   173.8                   172.8                              
                                                 
(1 ) Restructuring and other consists of:                                              
    Nine Months Ended                            
    September 27,
2020
              September 29,
2019
                           
  Contingent consideration fair value adjustment $ (8.0 )               $ (16.5 )                            
  Contract termination settlement fee   4.0                   -                              
  Acquisition related expenses and compensation   3.4                   2.3                              
  Employee severance   1.2                   2.4                              
  Other   1.2                   -                                  
    $ 1.9                 $ (11.8 )                            
                                                 
(2 ) For the nine months ended September 29, 2019, selling and administrative expenses include an equity charge for the modification of Teradyne's retired CFO's outstanding equity awards to allow continued vesting and maintain the original term in connection with his July 17, 2019 retirement.                
                                                 
(3 ) For the nine months ended September 27, 2020 and September 29, 2019, Interest and other included non-cash convertible debt interest expense. For the nine months ended September 27, 2020 and September 29, 2019, adjustments to exclude actuarial (gain) loss recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.                    
                                                 
(4 ) For the nine months ended September 27, 2020 and September 29, 2019, adjustment to exclude discrete income tax items. For the nine months ended September 29, 2019, income tax (benefit) provision includes a $26 million tax benefit from the release of uncertain tax position reserves due to the IRS completion of its audit of Teradyne's 2015 Federal tax return and includes a $15 million tax provision related to the finalization of our toll tax charge.                
                                                 
(5 ) For the nine months ended September 27, 2020, the non-GAAP diluted EPS calculation adds back $3.9 million of convertible debt interest expense to non-GAAP net income and non-GAAP weighted average diluted common shares include 6.4 million shares related to the convertible debt hedge transaction.          
                                                 
GAAP to Non-GAAP Reconciliation of Fourth Quarter 2020 guidance:                                            
                                                 
GAAP and non-GAAP fourth quarter revenue guidance:     $680 million   to $740 million                                      
GAAP net income per diluted share     $ 0.81     $ 0.96                                      
  Exclude acquired intangible assets amortization       0.03       0.03                                      
  Exclude non-cash convertible debt interest       0.02       0.02                                      
  Tax effect of non-GAAP adjustments       (0.01 )     (0.01 )                                    
  Convertible share adjustment       0.06       0.06                                      
Non-GAAP net income per diluted share     $ 0.90     $ 1.06                                      
                                                 
For press releases and other information of interest to investors, please visit Teradyne's homepage at http://www.teradyne.com.                      
Contact: Teradyne, Inc.                                       
Andy Blanchard 978-370-2425                                       
Vice President of Corporate Relations                                       

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