Teradyne Reports First Quarter 2023 Results

On October 7, 2022, the U.S. Department of Commerce published new regulations restricting the export to China of advanced semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and technology for the manufacturing in China of certain semiconductor manufacturing equipment. The new restrictions are lengthy and complex. Teradyne continues to assess the impact of these regulations on its business. At this time, the Company has determined that restrictions on the sale of semiconductor testers in China to test certain advanced semiconductors will impact Teradyne’s sales to certain companies in China. Several multinational companies manufacturing these advanced semiconductors in China have obtained one-year licenses allowing suppliers such as Teradyne to continue to provide testers to the facilities operated by these companies. We expect that other companies manufacturing advanced semiconductors in China will not receive licenses, thereby restricting Teradyne’s ability to provide testers to the facilities operated by these companies that do not receive a license. The Company is filing license requests to sell to and support certain customers in China for certain end uses that, if granted, may reduce the impact of these restrictions on the Company’s business. At this time, Teradyne does not know the impact these end user and end use restrictions will have on its business in China or on future revenues. In addition to the specific restrictions impacting Teradyne’s business, the regulations may have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, Teradyne’s business and revenues will be adversely impacted.

The Company also has determined that the restrictions on the export of certain US origin components and technology for use in the development and production in China of certain semiconductor manufacturing equipment impact its manufacturing and development operations in China. Teradyne has received a temporary authorization from the Department of Commerce allowing the Company to continue its manufacturing and development operations in China until the Department of Commerce issues a license to replace this temporary authorization. The Company has applied for a license but cannot assess the likelihood or timing of receiving this license. In addition to requesting a license, the Company is implementing procedures for minimizing the impact of these new regulations, but there is no assurance that these procedures will succeed.

Important factors that could cause actual results, the 2026 earnings model, earnings per share, use of cash, dividend payments, repurchases of common stock, or payment of the senior convertible notes to differ materially from those presently expected include: conditions affecting the markets in which Teradyne operates; decreased or delayed product demand from one or more significant customers; development, delivery and acceptance of new products; the ability to grow the Robotics business; increased research and development spending; deterioration of Teradyne’s financial condition; the continued impact of the COVID-19 pandemic and related government responses on the market and demand for Teradyne’s products, on its contract manufacturers and supply chain, and on its workforce; the impact of a supply shortage on our supply chain and contract manufacturers; the consummation and success of any mergers or acquisitions; unexpected cash needs; insufficient cash flow to make required payments and pay the principal amount on the senior convertible notes; the business judgment of the board of directors that a declaration of a dividend or the repurchase of common stock is not in the Company’s best interests; additional U.S. or global tax regulations or guidance; the impact of any tariffs or export controls imposed by the U.S. or China; compliance with trade protection measures or export restrictions; the impact of U.S. Department of Commerce or other government agency regulations relating to Huawei, HiSilicon and other customers or potential customers; the impact of U.S. Department Commerce export control regulations for certain U.S. products and technology sold to military end users or for military end-use in China; the impact of regulations published by the U.S. Department of Commerce relating to semiconductors and semiconductor manufacturing equipment destined for certain end uses in China; 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, 2022. 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 FIRST FISCAL QUARTER OF 2023
 
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS
 
 
    Quarter Ended
    April 2,
2023
  December 31,
2022
  April 3,
2022
           
Net revenues$617,529  $731,836  $755,370 
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (1)261,109     311,387     300,437  
                     
Gross profit 356,420     420,449     454,933  
                     
Operating expenses:                
  Selling and administrative (2) 150,955     142,752     140,185  
  Engineering and development 105,762     108,810     108,116  
  Acquired intangible assets amortization 4,802     4,670     5,063  
  Restructuring and other (3) 2,037     (2,369 )   15,714  
    Operating expenses 263,556     253,863     269,078  
                     
Income from operations 92,864     166,586     185,855  
                     
  Interest and other (income) expense (4) (4,220 )   (28,651 )   5,496  
                     
Income before income taxes 97,084     195,237     180,359  
  Income tax provision 13,553     22,936     18,431  
Net income $ 83,531     $ 172,301     $ 161,928  
                     
Net income per common share:                
Basic $ 0.54     $ 1.11     $ 1.00  
Diluted $ 0.50     $ 1.04     $ 0.92  
                     
Weighted average common shares - basic 155,904     155,762     162,048  
                     
Weighted average common shares - diluted (5) 166,308     165,468     175,565  
                     
                     
Cash dividend declared per common share $ 0.11     $ 0.11     $ 0.11  
                     
                     
                     
(1) Cost of revenues includes: Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022
    Provision for excess and obsolete inventory $ 5,610     $ 11,787     $ 1,590  
    Sale of previously written down inventory (385 )   (828 )   (262 )
      $ 5,225     $ 10,959     $ 1,328  
                     
(2) For the quarter ended April 2, 2023, selling and administrative expenses include an equity charge of $5.9 million for the modification of Teradyne’s retired CEO’s outstanding equity awards in connection with his February 1, 2023 retirement.        
                     
(3) Restructuring and other consists of: Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022  
    Employee severance $ 2,037     $ 775     $ 551  
    Gain on sale of asset -     (3,410 )   -  
    Litigation settlement -     -     14,700  
    Other -     266     463  
      $ 2,037     $ (2,369 )   $ 15,714  
                     
(4) Interest and other includes: Quarter Ended
      April 2,
2023
  December 31,
2022
  April 3,
2022
    Pension actuarial gains $ -     $ (25,592 )   $ -  
      $ -     $ (25,592 )   $ -  
                     
(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 quarters ended April 2, 2023, December 31, 2022, and April 3, 2022, 0.9 million, 1.2 million and 2.5 million shares, respectively, have been included in diluted shares. For the quarters ended April 2, 2023, December 31, 2022 and April 3, 2022, diluted shares also included 9.0 million, 7.9 million and 10.0 million shares, respectively, from the convertible note hedge transaction. 

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