Teradyne, Inc. · NASDAQ:TER
Teradyne — Q4 2020 Earnings Presentation
32 slides from Teradyne's earnings presentation, Jan 28, 2021
Slide 1: Financial Results for Q4 and Full Year 2020
Financial Results for Q4 and Full Year 2020 January 28, 2021
Slide 2: Safe Harbor (page 1 of 2)
SAFE HARBOR (page 1 of 2) This presentation contains forward-looking statements regarding Teradyne’s future business prospects, the impact of the COVID-19 pandemic, results of operations, market conditions, earnings per share, the payment of a quarterly dividend, the repurchase of Teradyne common st
Slide 3: Safe Harbor (page 2 of 2)
SAFE HARBOR (page 2 of 2) The global pandemic of the novel strain of the coronavirus (COVID-19) has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns. These measures have impac
Slide 4: Business Update and Outlook
Business Update and Outlook Mark Jagiela, Teradyne President and CEO 4
Slide 5: Q4'20 and 2020 Summary
Q4’20 and 2020 Summary Q4’20 Semiconductor Test and Industrial Automation Segment Revenue Grew Quarter on Quarter and Year on Year 2020 Sales of $3,121M, Non-GAAP EPS of $4.62 $1,000 $3.5B $5.00 2018 2019 2020 2021E (2) Sales EPS $3.0B $800 $3.1B$4.62 $4.00 $2.5B $600 $2.0B $2.3B $3.00 $2.1B $2.1B $
Slide 6: Semiconductor Test Markets are Growing
Semiconductor Test Markets are Growing (1) Semiconductor SOC (1) Memory $4,000 Test - $3,500 8% SOC market powered8 by CAGR % unit growth, complexity, $3,000 new technology adoption $2,500 Memory test driven by $2,000 bit growth, diversity, higher bandwidth $1,500 11% $1,000 CAGR (2) 2021 Market Siz
Slide 7: 2020 Highlights & 2021 Outlook
2020 Highlights & 2021 Outlook • 2020 Highlights: – Smartphone chip complexity growth, including 5G cellular, drove higher test demand – Ramped UltraFLEXplus shipments to serve the growing compute segment of the SOC market – Record Memory Test revenue from LPDDR-5 DRAM production ramp and continued
Slide 8: Fourth Quarter and Full Year 2020 Financial Results and First Quarter 2021 Guidance
Fourth Quarter and Full Year 2020 Financial Results and First Quarter 2021 Guidance Sanjay Mehta, Teradyne Vice President and Chief Financial Officer 8
Slide 9: Q4'20 Non-GAAP Results
Q4’20 Non-GAAP Results $s in millions, except EPS Q4’19 Actual(1) Q3’20 Actual(1) Q4’20 Actual(1) Sales $655M $819M $759M Gross Margin 58.5% $383M 56.0% $459M 59.3% $450M R&D 13.3% $87M 11.6% $95M 13.2% $100M SG&A 17.9% $117M 14.1% $116M 16.3% $124M OPEX 31.2% $204M 25.7% $211M 29.5% $224M Operating
Slide 10: Q4'20 and 2020 Segment Summary
Q4’20 and 2020 Segment Summary Semiconductor Industrial System Test Wireless Test Test Automation Quarter Sales $104M 4th $524M $92M $40M Mobility and Compute Sales growth of 10% in related test demand UR sales down 12%, Sales up 43% in 2020 vs 2020 vs 2019 on strong strong. Analog demand MiR sales
Slide 11: Q1'21 Non-GAAP Guidance
Q1’21 Non-GAAP Guidance Q4’20 Actual(1) Q1’21 Guidance(1) $s in millions, except EPS Sales $759M $720M - $780M Gross Margin 59% 58% - 59% OPEX 30% 31% - 29% Operating Profit 30% 28% - 30% Net Interest & Other Income/(Expense) $0.2M ($2M) Effective Tax Rate 14.5% 16.0% EPS $1.10 $0.95 - $1.11 Diluted
Slide 12: Teradyne OPEX History and Outlook
Teradyne OPEX History and Outlook Annual Non-GAAP OPEX(1) 2017 2018 2019 2020 2021E Industrial Automation(2) $62M $114M $149M $157M Test $507M $502M $523M $553M Variable Comp $87M $76M $86M $129M ~flat Total OPEX $656M $692M $758M $839M OPEX increasing 8%-10% in 2021 to further drive mid-term earnin
Slide 13: Teradyne Non-GAAP Earnings Model
Teradyne Non-GAAP Earnings Model Financial Model '19/'20 ’19/’20 Sales Mix 2019 2020 Avg 2022E (Old Model) 2024E (New Model) 11% TER Revenue ($M) $2,295 $3,121 $2,708 $2,700 $3,250 $3,500 $4,250 =$2,708M Gross Margin % 58% 57% 57% 58% 59% 58% 59% 89% Automated Test OPEX % 33% 27% 30% 32% 31% 29% 28%
Slide 14: January 2021 Summary
January 2021 Summary • Q4 Sales up 16% and non-GAAP EPS up 25% from Q4’19 • 2020 sales of $3.1B, up 36%; Non-GAAP EPS of $4.62, up 62% on strength in all test segments • Generated $684 million in free cash in 2020 • Expect 2021 SOC Test market to be $3.3-3.8B, Memory Test market $0.8-1.0B • Semicond
Slide 15: Supplemental Information
Supplemental Information 15
Slide 16: Annual Non-GAAP Results
Annual Non-GAAP Results $s in millions, except EPS 2019(1) 2020(1) Sales $2,295M $3,121M Gross Margin 58% $1,340M 57% $1,786M R&D 14% $323M 12% $375M SG&A 19% $435M 15% $464M OPEX 33% $758M 27% $839M Operating Profit 25% $582M 30% $948M Income Taxes (& effective tax rate) 17.0% $98M 15.25% $144M EPS
Slide 17: Balance Sheet & Capital Return
Balance Sheet & Capital Return Q4’19 Q3’20 Q4’20 Actual Actual Actual Cash and Marketable Securities $1,016M $1,341M $1,554M Inventory $197M $191M $222M DSO 51 Days 65 Days 62 Days Acquisition Earn-out Accruals(1) $40M $23M $7M Capital Additions $39M $63M $38M Depreciation and Amortization(2) $41M $
Slide 18: History of Balanced Capital Allocation
History of Balanced Capital Allocation 2015 2016 2017 2018 2019 2020 Cumulative Buybacks $300M $146M $200M $823M $500M $88M $2,058M(1) Dividends $51M $49M $55M $67M $61M $66M $350M Acquisitions $283M $15M $1M $194M $115M $9M $617M Total $633M $210M $257M $1,085M $676M $164M $3,025M Free Cash Flow(2)
Slide 19: 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 20: GAAP to Non-GAAP Earnings Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation GAAP to Non-GAAP Earnings Reconciliation (In millions, except per share amounts) Quarter Ended December 31, % of Net September 27, % of Net December 31, % of Net 2020 Revenues 2020 Revenues 2019 Revenues Net revenues $ 759.0 $ 819.5 $ 654.7 Gross profit GAA
Slide 21: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation (1) Restructuring and other consists of: Quarter Ended December 31, September 27, December 31, 2020 2020 2019 Contingent consideration fair value adjustment $ (15.3) $ (27.2) $ (2.8) Acquisition related expenses and compensation (0.9) (1.1) 0.2 Employee sev
Slide 22: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Twelve Months Ended December 31, % of Net December 31, % of Net 2020 Revenues 2019 Revenues Net Revenues $ 3,121.5 $ 2,295.0 Gross profit GAAP $ 1,785.7 57.2% $ 1,339.8 58.4% Inventory step-up 0.4 0.0% 0.4 0.0% Gross profit non-GAAP $ 1,786.1 57.2% $ 1,340.
Slide 23: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation (1) Restructuring and other consists of: Twelve Months Ended December 31, December 31, 2020 2019 Contingent consideration fair value adjustment $ (23.3) $ (19.3) Contract termination settlement fee 4.0 - Acquisition related expenses and compensation 2.5 2.5
Slide 24: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation T welve Months Ended December 31, % of Net December 31, % of Net 2019 Revenues 2018 Revenues Net Revenues $ 2,295.0 $ 2,100.8 Gross profit GAAP $ 1,339.8 58.4% $ 1,220.4 58.1% Inventory step-up 0.4 0.0% 0.4 0.0% Gross profit non-GAAP $ 1,340.2 58.4% $ 1,220
Slide 25: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation T we lve M onths E nde d December 31, % of Net December 31, % of Net 2017 Revenues 2016 Revenues Net Revenues $ 2,136.6 $ 1,753.3 Gross profit - GAAP $ 1,223.9 57.3% $ 959.6 54.7% Pension mark-to-market adjustment (1) (2.8) -0.1% (1.0) -0.1% Gross profit -
Slide 26: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Ye ar E nde d December 31, % of Net December 31, % of Net 2016 Revenues 2015 Revenues Net Revenues $ 1,753.3 $ 1,639.6 Gross profit - GAAP $ 959.6 54.7% $ 915.6 55.8% Inventory step-up - - 1.6 0.1% Pension mark-to-market adjustments (1) (1.0) -0.1% 8.3 0.5%
Slide 27: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Q4'19 Q3'20 Q4'20 Q1'21 Low Guidance Q1'21 High Guidance 2019 2020 $'s % of sales $'s % of sales $'s % of sales $'s % of sales $'s % of sales $'s % of sales $'s % of sales GAAP Operating Expenses $212 32% $189 23% $216 28% $232 32% $234 30% $786 34% $857 27
Slide 28: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation Q4'20 Q3'20 Q4'19 FY2020 FY2019 GAAP SG&A expense 124 116 117 465 437 Exclude stock compensation expense related to equity modification (1) - - (1) (2) Non-GAAP SG&A expense 124 116 117 464 435 28
Slide 29: 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 30: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation 2020 2019 2018 2017 GAAP Operating Expenses 857 786 747 696 Less Goodwill Impairment Charge - - - Less Intangible Asset Impairment - - - Less Intangible Asset Amortization (31) (40) (39) (31) Less Restructuring and Other 13 14 (15) (9) Pension Mark to Marke
Slide 31: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation 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 2024 Estimated GAAP
Slide 32: Appendix: GAAP to Non-GAAP Reconciliation
Appendix | GAAP to Non-GAAP Reconciliation FY 2022 Low FY 2022 High 2022 Estimated GAAP Operating Expenses as a % of Sales 33% 32% Less Intangible Asset Amortization as a % of Sales 1% 1% 2022 Estimated Non-GAAP Operating Expenses as a % of Sales 32% 31% FY 2022 Low FY 2022 High 2022 Estimated GAAP