Teradyne Reports Revenue and Earnings Growth in First Quarter 2018

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| Source: Teradyne, Inc.
  • Q1’18 Revenue of $487 million, up 7% from Q1’17  
  • Record Memory Test sales, up 210% from Q1’17
  • Universal Robots sales up 34% from Q1’17, expect 50%+ full year growth
  • Decline in demand outlook for mobile device test equipment in 2018
 Q1’18Q1’17Q4’17
Revenue (mil)$487 $457 $479
GAAP EPS$0.43$0.42 ($0.54)
Non-GAAP EPS$0.45 $0.44 $0.46

NORTH READING, Mass., April 24, 2018 (GLOBE NEWSWIRE) --  Teradyne, Inc. (NYSE:TER) reported revenue of $487 million for the first quarter of 2018 of which $373 million was in Semiconductor Test, $49 million in Industrial Automation, $43 million in System Test, and $23 million in Wireless Test. GAAP net profit for the first quarter was $87.0 million or $0.43 per share.  On a non-GAAP basis, Teradyne’s net income in the first quarter was $89.4 million, or $0.45 per diluted share, which excluded acquired intangible asset amortization, restructuring and other charges, non-cash convertible debt interest, discrete income tax adjustments, and included the related tax impact on non-GAAP adjustments.

"Despite the strong first quarter results, the demand outlook for 2018 mobile device test capacity declined sharply in the quarter and our second quarter guidance reflects that revised outlook. Those strong first quarter results included record Nextest memory shipments and the highest Eagle analog test shipments in over two years reflecting healthy demand in the automotive, industrial, and NAND Flash markets,” said CEO and President Mark Jagiela. “Universal Robots’ high growth continued in the quarter driven by broad based demand for UR’s easy to use collaborative robots and the group is on-track for 50%+ full year growth."

Guidance for the second quarter of 2018 is revenue of $490 million to $520 million, with GAAP net income of $0.39 to $0.46 per diluted share and non-GAAP net income of $0.45 to $0.52 per diluted share.  Non-GAAP guidance excludes acquired intangible asset amortization, non-cash convertible debt interest, restructuring and other charges and includes the related tax impact on non-GAAP adjustments.

Webcast
A conference call to discuss the first quarter results, along with management's business outlook, will follow at 8:00 a.m. ET, Wednesday, April 25. Interested investors should access the webcast at investors.teradyne.com/events-presentations at least five minutes before the call begins. Presentation materials will be available starting at 8:00 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 assets amortization, non-cash convertible debt interest, pension actuarial gains and losses, discrete income tax adjustments, and restructuring and other. 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 performance 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 performance 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 pension actuarial gains and losses. GAAP requires that these items be included in determining gross margin. Non-GAAP gross margin dollar amount and percentage are non-GAAP performance 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. Non-GAAP diluted shares include the impact of Teradyne’s call option on its shares. Management believes each of these non-GAAP performance 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 performance 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 equipment 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 products include collaborative robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency. In 2017, Teradyne had revenue of $2.14 billion and currently employs approximately 4,500 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 Teradyne’s future business prospects, results of operations, market conditions, earnings per share, the payment of a quarterly dividend, the repurchase of Teradyne common stock pursuant to a share repurchase program, use of proceeds and potential dilution from the senior convertible notes offering, potential borrowings under a senior secured credit facility, and the impact of the U.S. tax reform law. Such statements are based on the current assumptions and expectations of Teradyne’s management and are neither promises nor guarantees of future performance, events, earnings per share, use of cash, payment of dividends, repurchases of common stock, payment of the senior convertible notes, availability of, or borrowing under, the credit facility, or the impact of the U.S. tax reform law. 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, earnings per share, use of cash, dividend payments, repurchases of common stock, payment of the senior convertible notes 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 from one or more significant customers; development, delivery and acceptance of new products; the ability to grow the Industrial Automation business; increased research and development spending; deterioration of Teradyne’s financial condition; 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, the repurchase of common stock or borrowing under the credit facility is not in the company’s best interests; additional U.S. tax regulations or IRS guidance; the impact of any tariffs imposed in the U.S. or 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, 2017. 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 2018       
           
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)     
           
     Quarter Ended 
     April 1, 2018 December 31,
2017 (1)
 April 2, 2017 (1) 
           
Net revenues $487,467  $479,415  $456,913  
           
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (2)  217,635   208,485   191,897  
           
Gross profit  269,832   270,930   265,016  
           
Operating expenses:       
 Selling and administrative  90,505   87,880   84,792  
 Engineering and development  74,408   72,070   75,978  
 Acquired intangible assets amortization  7,698   7,384   7,952  
 Restructuring and other (3)  (313)  8,970   2,511  
   Operating expenses  172,298   176,304   171,233  
           
Income from operations  97,534   94,626   93,783  
           
 Interest and other (4)  (1,714)  3,458   (1,767) 
           
Income before income taxes  95,820   98,084   92,016  
 Income tax provision (5)  8,846   204,007   6,795  
Net income (loss) $86,974  $(105,923) $85,221  
           
Net income (loss) per common share:       
Basic   $0.45  $(0.54) $0.43  
Diluted   $0.43  $(0.54) $0.42  
           
Weighted average common shares - basic  195,255   196,010   200,005  
           
Weighted average common shares - diluted (6)  203,484   196,010   201,936  
           
           
Cash dividend declared per common share $0.09  $0.07  $0.07  
           
           
(1)Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs. 
           
(2)Cost of revenues includes: Quarter Ended 
     April 1, 2018 December 31,
2017
 April 2, 2017 
   Provision for excess and obsolete inventory $3,522  $1,690  $2,726  
   Sale of previously written down inventory  (2,243)  (1,048)  (1,134) 
     $1,279  $642  $1,592  
           
(3)Restructuring and other consists of: Quarter Ended 
     April 1, 2018 December 31,
2017
 April 2, 2017 
   Employee severance $3,881  $1,801  $583  
   Acquisition costs  774   -   -  
   Contingent consideration fair value adjustment  (4,968)  5,973   634  
   Impairment of fixed assets  -   1,124   -  
   Facility related  -   72   1,294  
     $(313) $8,970  $2,511  
           
           
(4)Interest and other includes: Quarter Ended 
     April 1, 2018 December 31,
2017
 April 2, 2017 
   Non-cash convertible debt interest expense $3,206  $3,166  $3,050  
   Pension actuarial (gains) losses  -   (3,786)  -  
     $3,206  $(620) $3,050  
           
(5)For the quarter ended December 31, 2017, income tax provision includes an expense of $186 million related to the estimated impact of U.S. tax law changes. 
           
(6)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 quarter ended April 1, 2018, 4.4 million shares have been included in diluted shares. For the quarter ended April 1, 2018, diluted shares also included 1.8 million shares from the convertible note hedge transaction. 
   
CONDENSED  CONSOLIDATED BALANCE SHEETS (In thousands)       
           
     April 1, 2018 December 31,
2017
   
           
Assets         
 Cash and cash equivalents $637,873  $429,843    
 Marketable securities  860,526   1,347,979    
 Accounts receivable, net  413,978   272,783    
 Inventories, net  131,857   107,525    
 Prepayments  and other current assets  112,191   112,151    
   Total current assets  2,156,425   2,270,281    
           
 Property, plant and equipment, net  281,284   268,447    
 Marketable securities  89,259   125,926    
 Deferred tax assets  77,705   84,026    
 Other assets  12,479   12,275    
 Retirement plans assets  17,928   17,491    
 Acquired intangible assets, net  84,413   79,088    
 Goodwill  275,700   252,011    
           
   Total assets $2,995,193  $3,109,545    
           
Liabilities        
 Accounts payable $103,950  $86,393    
 Accrued employees' compensation and withholdings  86,292   141,694    
 Deferred revenue and customer advances  85,892   83,614    
 Other accrued liabilities  58,387   59,083    
 Contingent consideration  15,581   24,497    
 Income taxes payable  34,828   59,055    
           
   Total current liabilities  384,930   454,336    
           
 Retirement plans liabilities  124,689   119,776    
 Long-term deferred revenue and customer advances  21,726   30,127    
 Deferred tax liabilities  6,185   6,720    
 Long-term other accrued liabilities  16,683   10,273    
 Long-term contingent consideration  -   20,605    
 Long-term income taxes payable  160,181   148,075    
 Long-term debt  369,421   365,987    
           
   Total liabilities  1,083,815   1,155,899    
           
Shareholders' equity  1,911,378   1,953,646    
           
   Total liabilities and shareholders' equity $2,995,193  $3,109,545    
           
CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS (In thousands)       
           
     Quarter Ended   
     April 1, 2018 April 2, 2017   
Cash flows from operating activities:       
 Net income $86,974  $85,221    
 Adjustments to reconcile net income to net cash used for operating activities:       
  Depreciation  16,336   16,143    
  Amortization  9,204   11,070    
  Stock-based compensation  9,544   8,945    
  Provision for excess and obsolete inventory  3,522   2,726    
  Contingent consideration fair value adjustment  (4,968)  634    
  Deferred taxes  8,696   (3,477)   
  Other  1,393   2    
  Changes in operating assets and liabilities, net of business acquired:      
   Accounts receivable  (140,747)  (123,792)   
   Inventories  (21,017)  (62,152)   
   Prepayments and other assets  (679)  1,104    
   Accounts payable and accrued expenses  (46,706)  (7,553)   
   Deferred revenue and customer advances  9,644   (3,333)   
   Retirement plans contributions  (1,020)  (947)   
   Income taxes  (12,106)  14,288    
Net cash used for operating activities  (81,930)  (61,121)   
           
Cash flows from investing activities:       
 Purchases of property, plant and equipment  (34,797)  (22,066)   
 Purchases of available-for-sale marketable securities  (490,324)  (153,317)   
 Proceeds from sales of available-for-sale marketable securities  800,671   213,593    
 Proceeds from maturities of available-for-sale marketable securities  212,698   88,184    
 Acquisition of business, net of cash acquired  (25,356)  -    
Net cash provided by investing activities  462,892   126,394    
           
Cash flows from financing activities:       
 Issuance of common stock under stock purchase and stock option plans  10,654   15,084    
 Repurchase of common stock  (134,276)  (37,730)   
 Dividend payments  (17,588)  (14,021)   
 Payment related to net settlement of employee stock compensation awards  (19,629)  (12,289)   
 Payment of contingent consideration  (13,571)  (1,050)   
Net cash used for financing activities  (174,410)  (50,006)   
           
Effects of exchange rate changes on cash and cash equivalents  1,478   1,595    
           
Increase in cash and cash equivalents  208,030   16,862    
Cash and cash equivalents at beginning of period  429,843   307,884    
Cash and cash equivalents at end of period $637,873  $324,746    
           


GAAP to Non-GAAP Earnings Reconciliation                       
                           
(In millions, except per share amounts)                       
            Quarter Ended            
    April 1,
2018
 % of Net
Revenues
     December 31,
2017 (1)
 % of Net
Revenues
     April 2,
2017 (1)
 % of Net
Revenues
    
                           
Net revenues $487.5        $479.4        $456.9       
                           
Gross profit $269.8   55.3%     $270.9  56.5%     $265.0  58.0%    
                           
Income from operations - GAAP$97.5   20.0%     $94.6  19.7%     $93.8  20.5%    
 Acquired intangible assets amortization 7.7   1.6%      7.4  1.5%      8.0  1.8%    
 Restructuring and other (2) (0.3)  -0.1%      9.0  1.9%      2.5  0.5%    
Income from operations - non-GAAP$104.9   21.5%     $111.0  23.2%     $104.3  22.8%    
                           
        Net Income
per Common Share
     Net (Loss) Income
per Common Share
     Net Income
per Common Share
    April 1,
2018
 % of Net
Revenues
 Basic  Diluted December 31,
2017
 % of Net
Revenues
 Basic  Diluted April 2,
2017
 % of Net
Revenues
 Basic  Diluted
Net income (loss) - GAAP$87.0   17.8% $0.45  $0.43  $(105.9) -22.1% $(0.54) $(0.54) $85.2  18.6% $0.43  $0.42 
 Acquired intangible assets amortization 7.7   1.6%  0.04   0.04   7.4  1.5%  0.04   0.04   8.0  1.8%  0.04   0.04 
 Interest and other (3) 3.2   0.7%  0.02   0.02   (0.6) -0.1%  (0.00)  (0.00)  3.1  0.7%  0.02   0.02 
 Restructuring and other (2) (0.3)  -0.1%  -   -   9.0  1.9%  0.05   0.05   2.5  0.5%  0.01   0.01 
 Exclude discrete tax adjustments (4) (6.3)  -1.3%  (0.03)  (0.03)  184.4  38.5%  0.94   0.93   (7.0) -1.5%  (0.04)  (0.03)
 Non-GAAP tax adjustments (1.9)  -0.4%  (0.01)  (0.01)  (2.9) -0.6%  (0.01)  (0.01)  (3.1) -0.7%  (0.02)  (0.02)
 Convertible share adjustment -   -   -   0.01   -  -   -   -   -  -   -   - 
Net income - non-GAAP$89.4   18.3% $0.46  $0.45  $91.4  19.1% $0.47  $0.46  $88.7  19.4% $0.44  $0.44 
                           
GAAP and non-GAAP weighted average common shares - basic 195.3         196.0         200.0       
GAAP weighted average common shares - diluted 203.5         196.0         201.9       
 Exclude dilutive shares related to convertible note transaction (6.2)        -         -       
 Include dilutive shares -         3.0         -       
Non-GAAP weighted average common shares - diluted 197.3         199.0         201.9       
                           
                           
(1)Certain prior period amounts were reclassified to conform with the first quarter 2018 adoption of new accounting guidance for the presentation of pension and post retirement costs.
                           
(2)Restructuring and other consists of:                       
    Quarter Ended      
    April 1,
2018
       December 31,
2017
       April 2,
2017
      
  Employee severance$3.9        $1.8        $0.6       
  Acquisition costs 0.8         -         -       
  Contingent consideration fair value adjustment (5.0)        6.0         0.6       
  Impairment of fixed assets -         1.1         -       
  Facility related -         0.1         1.3       
    $(0.3)       $9.0        $2.5       
                           
(3)For the quarters ended April 1, 2018, December 31, 2017 and April 2, 2017,  adjustment to exclude non-cash convertible debt interest expense. For the quarter ended December 31, 2017, adjustment to exclude actuarial (gains) losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.
                           
(4)For the quarters ended April 1, 2018, December 31, 2017 and April 2, 2017, adjustment to exclude discrete income tax items. For the quarter ended December 31, 2017, adjustment to treat $186 million expense related to the estimated impact of U.S. tax law changes as a discrete item.
                           
                           
GAAP to Non-GAAP Reconciliation of Second Quarter 2018 guidance:                       
                           
GAAP and non-GAAP second quarter revenue guidance:  $490 millionto$520 million                  
GAAP net income per diluted share  $0.39  $0.46                   
 Exclude acquired intangible assets amortization   0.04   0.04                   
 Exclude non-cash convertible debt interest   0.02   0.02                   
 Exclude restructuring and other   0.01   0.01                   
 Tax effect of non-GAAP adjustments   (0.01)  (0.01)                  
 Convertible share adjustment   0.01   0.01                   
Non-GAAP net income per diluted share  $0.45  $0.52                   
                           
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