Teradyne, Inc. · NASDAQ:TER
Teradyne — Q3 2022 Earnings Presentation
25 slides from Teradyne's earnings presentation, Oct 26, 2022
Slide 1: Financial Results for Q3 2022
Financial Results for Q3 2022 October 26, 2022
Slide 2: Safe Harbor (page 1 of 3)
SAFE HARBOR (page 1 of 3) This presentation contains forward-looking statements regarding Teradyne’s future business prospects, the impact of the global pandemic of the novel strain of the coronavirus (COVID-19), results of operations, market conditions, earnings per share, the impact of supply chai
Slide 3: Safe Harbor (page 2 of 3)
SAFE HARBOR (page 2 of 3) 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 Chin
Slide 4: Safe Harbor (page 3 of 3)
SAFE HARBOR (page 3 of 3) Important factors that could cause actual results, the 2024 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 aff
Slide 5: Business Update and Outlook
Business Update and Outlook Mark Jagiela, Teradyne CEO Greg Smith, Teradyne President 4
Slide 6: Q3'22 Summary
Q3’22 Summary Sales of $827M, Gross Margins of 58.7% and EPS of $1.15 $1,000M 65% $2.00 $800M 60% $1.50 $600M 55% $1.00 $951M $400M $841M $827M 50% 60.1% 60.2% $1.59 58.7% $1.21 $1.15 $0.50 $200M 45% $M 40% $0.00 Q3'21 Q2'22 Q3'22 Q3'21 Q2'22 Q3'22 Q3'21 Q2'22 Q3'22 Quarterly Revenue Gross Margin %
Slide 7: October 2022 Update
October 2022 Update • Q3 results and Q4’22 plan better than July outlook on Test strength – Supply constraints resolved, enabling higher Q3 test shipments – Q4’22 test demand remains weak vs Q4’21 but incrementally better than July outlook • Industrial Automation weaker in 2H’22 than July outlook –
Slide 8: Third Quarter 2022 Financial Results and Fourth Quarter 2022 Guidance
Third Quarter 2022 Financial Results and Fourth Quarter 2022 Guidance Sanjay Mehta, Teradyne Vice President and Chief Financial Officer 8
Slide 9: Q3'22 Non-GAAP Results
Q3’22 Non-GAAP Results $s in millions, except EPS Q3’21 Actual(1) Q2’22 Actual(1) Q3’22 Actual(1) Sales $951M $841M $827M Gross Margin 60.1% $571M 60.2% $506M 58.7% $485M R&D 11.3% $107M 13.3% $112M 13.5% $112M SG&A 14.2% $135M 16.6% $140M 16.4% $136M OPEX 25.5% $242M 29.9% $251M 29.9% $247M Operati
Slide 10: Q3'22 Segment Summary
Q3’22 Segment Summary Semiconductor Industrial System Test Wireless Test Test Automation 3rd Quarter $576M $116M $46M $89M Sales Sales down 16% vs Q3’21 Sales up 13% vs Q3’21 Sales down 33% vs Q3’21 Sales down 2% vs Q3’21 Due to slowed smartphone Due to softening complexity growth Storage Test shipm
Slide 11: Balance Sheet & Capital Return
Balance Sheet & Capital Return Q3’21 Q2’22 Q3’22 Actual Actual Actual Cash and Marketable Securities $1,450M $894M $887M Inventory $224M $296M $311M DSO 57 Days 74 Days 58 Days Capital Additions $29M $46M $39M Depreciation and Amortization(1) $42M $39M $41M Free Cash Flow(2) $493M $70M $233M Buyback
Slide 12: Q4'22 Non-GAAP Guidance
Q4’22 Non-GAAP Guidance $s in millions, except EPS Q3’22 Actual(1) Q4’22 Guidance(1) Sales $827M $670M - $750M Gross Margin 58.7% 56% - 57% OPEX 30% 38% - 34% Operating Profit 29% 18% - 23% Effective Tax Rate 18.7% 17.3% EPS $1.15 $0.62 - $0.86 Diluted Shares 165M 164M (1) See attached appendix for
Slide 13: October 2022 Update
October 2022 Update • Q3 results and Q4’22 plan better than July outlook on Test strength – Supply constraints resolved, enabling higher Q3 test shipments – Q4’22 test demand remains weak vs Q4’21 but incrementally better than July outlook • Industrial Automation weaker in 2H’22 than July outlook –
Slide 14: Supplemental Information
Supplemental Information 14
Slide 15: History of Capital Allocation
History of Capital Allocation • Since 2015, 74.3M shares repurchased at an average price of ~$46 per share 2015 2016 2017 2018 2019 2020 2021 9mo22 Cumulative ($M) Buybacks $300M $146M $200M $823M $500M $88M $600M $750M $3,408M Dividends $51M $49M $55M $67M $61M $66M $66M $53M $468M Acquisitions $28
Slide 16: Teradyne Non-GAAP Earnings Model
Teradyne Non-GAAP Earnings Model Financial Model '19/'20 '20/'21 ‘20/’21 Sales Mix Avg Avg 2024E (Old Model) 2024E (New Model) 10% TER Revenue ($M) $2,708 $3,412 $3,500 $4,250 $4,600 $5,250 + 27% (2) =$3,412M Growth off '19/'20 7% 12% 14% 18% Automated Gross Margin % 57% 58% 58% 59% 59% 60% 90% Test
Slide 17: Semiconductor Test Market Growth Trends Are Favorable
Semiconductor Test Market Growth Trends Are Favorable (1) Semiconductor SOC Memory Test $6,000 SOC market powered by $5,000 unit growth, complexity, 10% new technology CAGR adoption $4,000 Memory test driven by $3,000 bit growth, diversity, higher bandwidth $2,000 9% CAGR (2) 2022 Market Sizes $1,00
Slide 18: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation In addition to disclosing results that are determined in accordance with GAAP, Teradyne also discloses in this presentation and on the earnings call non-GAAP results of operations that exclude certain income items and charges. These results are provided as
Slide 19: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation GAAP to Non-GAAP Earnings Reconciliation (In millions, except per share amounts) Quarter Ended October 2, % of Net July 3, % of Net October 3, % of Net 2022 Revenues 2022 Revenues 2021 Revenues Net revenues $ 827.1 $ 840.8 $ 950.5 Gross profit GAAP and non-
Slide 20: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation (1) Restructuring and other consists of: Quarter Ended Quarter Ended October 2, July 3, October 3, 2022 2022 2021 Employee severance $ 1.2 $ 0.4 $ 0.6 Acquisition related expenses and compensation - - 0.3 Other 0.6 1.7 0.3 $ 1.8 $ 2.0 $ 1.2 (2) For the quar
Slide 21: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Q3'21 Q2'22 Q3'22 Q4'22 Low Guidance Q4'22 High Guidance $'s % of sales $'s % of sales $'s % of sales $'s % of sales $'s % of sales GAAP Operating Expenses $249 26% $258 31% $254 31% $256 38% $259 35% Intangible Asset Amortization -$5 -1% -$5 -1% -$5 -1% -$
Slide 22: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Quarter Ended Nine Months Ended Twelve Months Ended October October October 2, October 3, Percentage 2, 3, Percentage December 31, December 31, Percentage 2022 2021 Change 2022 2021 Change 2022 2021 Change Industrial Automation segment revenues As reported
Slide 23: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation • Teradyne determines non-GAAP operating cash flow (“Free Cash Flow”) by adjusting GAAP cash flow from operations excluding discontinued operations, less property, plant and equipment additions. Free cash flow is considered a non-GAAP financial measure. Ter
Slide 24: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Old 2024 Model Range FY 2024 Low FY 2024 High 2024 Estimated GAAP Operating Expenses as a % of Sales 29% 29% Less Intangible Asset Amortization as a % of Sales 1% 0% 2024 Estimated Non-GAAP Operating Expenses as a % of Sales 29% 28% FY 2024 Low FY 2024 High
Slide 25: Appendix | GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation New 2024 Model Range FY 2024 Low FY 2024 Mid FY 2024 High 2024 Estimated GAAP Diluted EPS $ 6.90 $ 7.90 $ 8.90 Add Back Intangible Asset Amortization $ 0.10 $ 0.10 $ 0.10 2024 Estimated Non-GAAP Diluted EPS $ 7.00 $ 8.00 $ 9.00 25