• Revenue of $567 million, organic growth of 11% from Q3’17
  • Memory Test Q3’18 revenue of $87 million, up 83% from Q3’17
  • Universal Robots revenue up 46% from Q3’17, Industrial Automation segment revenue up 64%
 Q3’18Q2’18Q3’17
Revenue (mil)$567 $527 $503
GAAP EPS$0.63$0.52 $0.52
Non-GAAP EPS$0.71 $0.59 $0.54

NORTH READING, Mass., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Teradyne, Inc. (NYSE: TER) reported revenue of $567 million for the third quarter of 2018 of which $417 million was in Semiconductor Test, $66 million in Industrial Automation, $50 million in System Test, and $34 million in Wireless Test. GAAP net profit for the third quarter was $120.0 million or $0.63 per diluted share. On a non-GAAP basis, Teradyne’s net income in the third quarter was $133.3 million, or $0.71 per diluted share, which excluded acquired intangible asset amortization, non-cash convertible debt interest, restructuring and other charges and included the related tax impact on non-GAAP adjustments.

"Increased third quarter sales, combined with favorable product mix, drove earnings above our guidance," said President and CEO Mark Jagiela. "In Semiconductor Test, sales increased 5% compared to Q3'17 due to continued strength in automotive and industrial chip test markets combined with increased memory test demand for our expanded Magnum product line. Universal Robots (UR) growth, combined with 2018 acquisitions MiR and Energid, drove our Industrial Automation sales up 64% compared to Q3'17. Growing traction for UR’s next generation e-Series Cobots and expanded distribution for MiR's mobile platform powered the growth and positions us for a strong finish to the year.

With expected strong Industrial Automation and Semiconductor Test shipments, the mid-point of our Q4 guidance delivers another year with over $2 billion in sales and over $2 of earnings per share."

Guidance for the fourth quarter of 2018 is revenue of $480 million to $510 million, with GAAP net income of $0.39 to $0.46 per diluted share and non-GAAP net income of $0.46 to $0.54 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 third quarter results, along with management's business outlook, will follow at 10:00 a.m. ET, Wednesday, October 24. 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 10:00 a.m. ET.

A replay will be available on the Teradyne website at investors.teradyne.com.

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, fair value inventory step-up related to Mobile Industrial Robots, and restructuring and other, and includes the related tax impact on non-GAAP adjustments. 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 as a percentage of revenue, 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 fair value inventory step-up related to Mobile Industrial Robots. GAAP requires that this item 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, autonomous mobile robots and sensing and simulation software, used by global manufacturing and industrial customers to improve quality and increase manufacturing efficiency. In 2017, Teradyne had revenue of $2.14 billion and currently employs approximately 4,800 people worldwide. For more information, visit teradyne.com. Teradyne® 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, export and tariff laws. 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, export and tariff laws. 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 or export controls 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 and the Quarterly Report on Form 10-Q for the period ended July 1, 2018. 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 THIRD FISCAL QUARTER OF 2018           
  
CONDENSED  CONSOLIDATED  STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)         
               
     Quarter Ended Nine Months Ended 
     September 30,
2018
 July 1,
2018
 October 1,
2017 (1)
 September 30,
2018
 October 1,
2017 (1)
 
               
Net revenues $566,848  $526,929  $503,378  $1,581,244  $1,657,191  
               
 Cost of revenues (exclusive of acquired intangible assets amortization shown separately below) (2)  233,155   219,595   208,509   670,385   706,667  
               
Gross profit  333,693   307,334   294,869   910,859   950,524  
               
Operating expenses:           
 Selling and administrative  100,199   99,410   86,130   290,115   261,034  
 Engineering and development  77,049   75,342   76,986   226,799   235,235  
 Acquired intangible assets amortization  11,142   9,793   7,028   28,633   23,145  
 Restructuring and other (3)  1,710   2,389   (4,407)  3,785   392  
   Operating expenses  190,100   186,934   165,737   549,332   519,806  
               
Income from operations  143,593   120,400   129,132   361,527   430,718  
               
 Interest and other (4)  (2,749)  (388)  (1,695)  (4,852)  (4,389) 
               
Income before income taxes  140,844   120,012   127,437   356,675   426,329  
 Income tax provision  20,863   18,975   24,017   48,684   62,713  
Net income $119,981  $101,037  $103,420  $307,991  $363,616  
               
Net income per common share:           
Basic   $0.65  $0.53  $0.52  $1.62  $1.83  
Diluted   $0.63  $0.52  $0.52  $1.57  $1.81  
               
Weighted average common shares - basic  185,744   190,730   197,485   190,576   198,755  
               
Weighted average common shares - diluted (5)  190,505   194,909   200,775   196,300   201,413  
               
               
Cash dividend declared per common share $0.09  $0.09  $0.07  $0.27  $0.21  
               
               
(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 Nine Months Ended 
     September 30,
2018
 July 1,
2018
 October 1,
2017
 September 30,
2018
 October 1,
2017
 
   Provision for excess and obsolete inventory $3,347  $2,653  $1,859  $9,522  $7,154  
   Sale of previously written down inventory  (1,013)  (1,922)  (3,121)  (5,178)  (6,404) 
     $2,334  $731  $(1,262) $4,344  $750  
               
(3)Restructuring and other consists of: Quarter Ended Nine Months Ended 
     September 30,
2018
 July 1,
2018
 October 1,
2017
 September 30,
2018
 October 1,
2017
 
   Employee severance $1,667  $2,398  $581  $7,945  $1,953  
   Acquisition related expenses and compensation  811   2,544   -   4,129   -  
   Contingent consideration fair value adjustment  (768)  (3,500)  (286)  (9,236)  1,847  
   Other  -   947   362   947   1,656  
   Property insurance recovery  -   -   (5,064)  -   (5,064) 
     $1,710  $2,389  $(4,407) $3,785  $392  
               
               
(4) Interest and other includes: Quarter Ended Nine Months Ended 
     September 30,
2018
 July 1,
2018
 October 1,
2017
 September 30,
2018
 October 1,
2017
 
   Non-cash convertible debt interest $3,286  $3,245  $3,127  $9,737  $9,265  
   Pension actuarial loss (gain)  267   (71)  -   196   (2,504) 
     $3,553  $3,174  $3,127  $9,933  $6,761  
               
(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 September 30, 2018, July 1, 2018 and October 1, 2017, 3.0 million, 2.6 million and 1.1 million shares, respectively, have been included in diluted shares. For the nine months ended September 30, 2018 and October 1, 2017, 3.4 million and 0.6 million shares, respectively, have been included in diluted shares. For the quarter ended September 30, 2018 and the nine months ended September 30, 2018, diluted shares also included 0.1 million and 0.6 million shares, respectively, from the convertible note hedge transaction. 
               


CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (In thousands)     
         
     September 30,
2018
 December 31,
2017
 
         
Assets       
 Cash and cash equivalents $814,019 $429,843 
 Marketable securities  418,410  1,347,979 
 Accounts receivable, net  352,476  272,783 
 Inventories, net  154,705  107,525 
 Prepayments and other current assets  139,785  112,151 
   Total current assets  1,879,395  2,270,281 
         
 Property, plant and equipment, net  278,071  268,447 
 Marketable securities  91,982  125,926 
 Deferred tax assets  70,772  84,026 
 Other assets  11,421  12,275 
 Retirement plans assets  17,885  17,491 
 Acquired intangible assets, net  139,963  79,088 
 Goodwill  392,998  252,011 
         
   Total assets $2,882,487 $3,109,545 
         
Liabilities      
 Accounts payable $107,890 $86,393 
 Accrued employees' compensation and withholdings  116,546  141,694 
 Deferred revenue and customer advances  77,953  83,614 
 Other accrued liabilities  95,888  59,083 
 Contingent consideration  35,532  24,497 
 Income taxes payable  24,603  59,055 
         
   Total current liabilities  458,412  454,336 
         
 Retirement plans liabilities  127,037  119,776 
 Long-term deferred revenue and customer advances  29,387  30,127 
 Deferred tax liabilities  21,748  6,720 
 Long-term other accrued liabilities  28,956  10,273 
 Long-term contingent consideration  25,410  20,605 
 Long-term income taxes payable  147,360  148,075 
 Long-term debt  376,417  365,987 
         
   Total liabilities  1,214,727  1,155,899 
         
Shareholders' equity  1,667,760  1,953,646 
         
   Total liabilities and shareholders' equity $2,882,487 $3,109,545 
         


CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS (In thousands)        
            
     Quarter Ended Nine Months Ended
     September 30,
2018
 October 1,
2017
 September 30,
2018
 October 1,
2017
Cash flows from operating activities:         
 Net income $  119,981  $  103,420  $  307,991  $  363,616 
 Adjustments to reconcile net income to net cash provided by operating activities:        
  Depreciation    16,774     16,769     49,930     49,243 
  Amortization    12,732     9,901     32,909     32,313 
  Stock-based compensation    7,702     8,308     25,327     25,620 
  Deferred taxes    7,130     2,884     24,442     (679)
  Provision for excess and obsolete inventory    3,347     1,859     9,522     7,154 
  Contingent consideration adjustment    (768)    (286)    (9,236)    1,847 
  Retirement plan actuarial losses    267     -      196     (2,504)
  Property insurance recovery    -      (4,309)    -      (4,309)
  Other    (652)    36     516     429 
  Changes in operating assets and liabilities, net of businesses acquired:       
   Accounts receivable    101,596     137,807     (77,807)    (75,623)
   Inventories    (12,834)    31,919     (34,117)    23,770 
   Prepayments and other assets    (30,360)    2,937     (28,719)    7,362 
   Accounts payable and other accrued expenses    24,279     (27,778)    16,124     5,298 
   Deferred revenue and customer advances    (695)    29,223     9,823     34,535 
   Retirement plans contributions    (1,071)    (2,875)    (3,244)    (4,858)
   Income taxes    (6,844)    15     (33,152)    15,808 
Net cash provided by operating activities    240,584     309,830     290,505     479,022 
            
Cash flows from investing activities:        
 Purchases of property, plant and equipment    (25,606)    (27,280)    (88,269)    (73,247)
 Proceeds from government subsidy for property, plant and equipment    7,920     -      7,920     -  
 Purchases of marketable securities    (162,450)    (701,704)    (809,521)    (1,036,523)
 Proceeds from sales of marketable securities    14,111     129,915     843,164     443,169 
 Proceeds from maturities of marketable securities    464,238     165,648     934,100     473,255 
 Proceed from property insurance    -      5,064     -      5,064 
 Proceed from life insurance    1,126     -      1,126     -  
 Acquisition of businesses, net of cash acquired    1,158     -      (169,474)    -  
Net cash provided by (used for) investing activities    300,497     (428,357)    719,046     (188,282)
            
Cash flows from financing activities:         
 Issuance of common stock under stock purchase and stock option plans    10,278     9,247     20,959     24,462 
 Repurchase of common stock    (201,468)    (57,493)    (562,263)    (151,821)
 Dividend payments    (16,638)    (13,805)    (51,320)    (41,730)
 Payment related to net settlement of employee stock compensation awards    (90)    (146)    (19,841)    (12,584)
 Payment of contingent consideration    -      -      (13,571)    (1,050)
Net cash used for financing activities    (207,918)    (62,197)    (626,036)    (182,723)
            
Effects of exchange rate changes on cash and cash equivalents    472     1,052     661     2,776 
            
Increase (decrease) in cash and cash equivalents    333,635     (179,672)    384,176     110,793 
Cash and cash equivalents at beginning of period    480,384     598,349     429,843     307,884 
Cash and cash equivalents at end of period $  814,019  $  418,677  $  814,019  $  418,677 
            


GAAP to Non-GAAP Earnings Reconciliation                       
                           
(In millions, except per share amounts)                       
            Quarter Ended            
    September 30,
2018
 % of Net Revenues     July 1,
2018
 % of Net Revenues     October 1,
2017 (1)
 % of Net Revenues    
                           
Net revenues $566.8        $526.9        $503.4       
                           
Gross profit GAAP$333.7   58.9%     $307.3  58.3%     $294.8  58.6%    
 Inventory step-up -   -       0.4  0.1%      -  -     
Gross profit non-GAAP$333.7   58.9%     $307.7  58.4%     $294.8  58.6%    
                           
Income from operations - GAAP$143.6   25.3%     $120.4  22.9%     $129.1  25.6%    
 Acquired intangible assets amortization 11.1   2.0%      9.8  1.9%      7.0  1.4%    
 Restructuring and other (2) 1.7   0.3%      2.4  0.5%      (4.4) -0.9%    
 Inventory step-up -   -       0.4  0.1%      -  -     
Income from operations - non-GAAP$156.4   27.6%     $133.0  25.2%     $131.7  26.2%    
                           
        Net Income
per Common Share
     Net Income
per Common Share
     Net Income
per Common Share
    September 30,
2018
 % of Net Revenues Basic  Diluted July 1,
2018
 % of Net Revenues Basic  Diluted October 1,
2017
 % of Net Revenues Basic  Diluted
Net income - GAAP$120.0   21.2% $0.65  $0.63  $101.0  19.2% $0.53  $0.52  $103.4  20.5% $0.52  $0.51 
 Acquired intangible assets amortization 11.1   2.0%  0.06   0.06   9.8  1.9%  0.05   0.05   7.0  1.4%  0.04   0.03 
 Interest and other (3) 3.3   0.6%  0.02   0.02   3.2  0.6%  0.02   0.02   3.1  0.6%  0.02   0.02 
 Restructuring and other (2) 1.7   0.3%  0.01   0.01   2.4  0.5%  0.01   0.01   (4.4) -0.9%  (0.02)  (0.02)
 Pension mark-to-market adjustment (3) 0.3   0.1%  0.00   0.00   (0.1) 0.0%  (0.00)  (0.00)  -  -   -   - 
 Inventory step-up -   -   -   -   0.4  0.1%  0.00   0.00   -  -   -   - 
 Exclude discrete tax adjustments (4) 0.3   0.1%  0.00   0.00   (0.5) -0.1%  (0.00)  (0.00)  0.3  0.1%  0.00   0.00 
 Non-GAAP tax adjustments (3.4)  -0.6%  (0.02)  (0.02)  (3.4) -0.6%  (0.02)  (0.02)  (1.7) -0.3%  (0.01)  (0.01)
 Convertible share adjustment -   -   -   0.01   -  -   -   0.01   -  -   -   - 
Net income - non-GAAP$133.3   23.5% $0.72  $0.71  $112.8  21.4% $0.59  $0.59  $107.7  21.4% $0.55  $0.54 
                           
GAAP and non-GAAP weighted average common shares - basic 185.7         190.7         197.5       
GAAP weighted average common shares - diluted 190.5         194.9         200.8       
 Exclude dilutive shares related to convertible note transaction (3.1)        (2.6)        (1.1)      
Non-GAAP weighted average common shares - diluted 187.4         192.3         199.7       
                           
                           
(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      
    September 30,
2018
       July 1,
2018
       October 1,
2017
      
  Employee severance$1.7        $2.4        $0.6       
  Acquisition related expenses and compensation 0.8         2.5         -       
  Contingent consideration fair value adjustment (0.8)        (3.5)        (0.3)      
  Other  -         0.9         0.4       
  Property insurance recovery -         -         (5.1)      
    $1.7        $2.4        $(4.4)      
                           
(3)

For the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, adjustment to exclude non-cash convertible debt interest expense. For the quarters ended September 30, 2018 and July 1, 2018, adjustments to exclude actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting policy.
                           
(4)For the quarters ended September 30, 2018, July 1, 2018 and October 1, 2017, adjustment to exclude discrete income tax items.     
       
    Nine Months Ended        
    September 30,
2018
 % of Net Revenues     October 1,
2017 (1)
 % of Net Revenues            
                           
Net Revenues
$1,581.2        $1,657.2               
                           
Gross profit GAAP$910.9   57.6%     $950.5  57.4%            
 Inventory step-up 0.4   0.0%      -  -             
Gross profit non-GAAP$911.3   57.6%     $950.5  57.4%            
                           
Income from operations - GAAP$361.5   22.9%     $430.7  26.0%            
 Acquired intangible assets amortization 28.6   1.8%      23.1  1.4%            
 Restructuring and other (2) 3.8   0.2%      0.4  0.0%            
 Inventory step-up 0.4   0.0%      -  -             
Income from operations - non-GAAP$394.3   24.9%     $454.2  27.4%            
                           
        Net Income
per Common Share
     Net Income
per Common Share
        
    September 30,
2018
 % of Net Revenues Basic  Diluted October 1,
2017
 % of Net Revenues Basic  Diluted        
Net income - GAAP$308.0   19.5 $1.62  $1.57  $363.6  21.9% $1.83  $1.81         
 Acquired intangible assets amortization 28.6   1.8%  0.15   0.15   23.1  1.4%  0.12   0.11         
 Interest and other (3) 9.7   0.6%  0.05   0.05   9.3  0.6%  0.05   0.05         
 Restructuring and other (2) 3.8   0.2%  0.02   0.02   0.4  0.0%  0.00   0.00         
 Inventory step-up 0.4