01—Abstract
Summary
Summary of the 10-K filed February 22, 2021. Cited figures are marked; the original filing is the authoritative source.
Teradyne, Inc.'s 2020 10-K filing reveals a strong year for its test businesses, particularly Semiconductor Test, which saw a significant revenue increase driven by demand in mobility and memory sectors.
This growth was partly offset by a decline in the Industrial Automation segment, impacted by the COVID-19 pandemic and a general industrial downturn. However, the company anticipates a return to growth in Industrial Automation in 2021. Teradyne's strategy focuses on expanding market share in its test businesses through product differentiation and continued investment in Industrial Automation, while balancing capital allocation for shareholder returns and opportunistic acquisitions.
The company's financial performance in 2020 demonstrated resilience, with overall revenue growth despite the challenges in its industrial automation segment. Key financial highlights include robust operating income and a healthy cash flow generation, enabling continued investment in R&D and potential returns to shareholders. Investors should note the significant concentration of revenue from a few key customers, particularly in the Semiconductor Test segment, which presents a potential risk.
02—Key points
Key Highlights
- Teradyne reported a substantial increase in Semiconductor Test revenue (45.5%) in 2020, driven by strong demand in mobility and memory test applications.
- The Industrial Automation segment experienced a revenue decrease of 6.2% in 2020, primarily due to the COVID-19 pandemic and a global industrial downturn, though a return to growth is expected in 2021.
- Consolidated revenues grew by 36.2% in 2020, reaching $3.12 billion, largely propelled by the strong performance in Semiconductor Test and System Test segments.
- The company's strategy prioritizes profitable market share growth in test businesses and continued investment in Industrial Automation, balanced with capital allocation for shareholder returns and acquisitions.
- Backlog increased to $929.6 million at the end of 2020, up from $810.0 million in 2019, indicating strong future demand.
- Revenue concentration remains a key factor, with Taiwan Semiconductor Manufacturing Company Ltd. accounting for 15% of consolidated revenues in 2020, and the top five direct customers representing 36% of consolidated revenues.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Teradyne, Inc kept $0.25.
- Revenue$3.12B100.0%
- Cost of revenue−$1.34B42.8%
- Gross profit$1.79B57.2%
- Operating costs−$857.3M27.5%
- Operating income$928.4M29.7%
- Interest, other & tax−$144.3M4.6%
- Net income$784.1M25.1%
Where FY2020 revenue went
$3.12B- Cost of revenue: $1.34B, 43% of revenue
- Net income: $784.1M, 25% of revenue
- SG&A: $464.8M, 15% of revenue
- Other operating costs: $392.6M, 13% of revenue
- Interest, other & tax: $144.3M, 4.6% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 22, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $3.12B$2.29B | +36.0% |
| Cost of Revenue | $1.34B$955.14M | +39.8% |
| Gross Profit | $1.79B$1.34B | +33.3% |
| SG&A Expenses | $464.77M$437.08M | +6.3% |
| Operating Expenses | $857.33M$786.17M | +9.1% |
| Operating Income | $928.41M$553.65M | +67.7% |
| Interest Expense | $24.18M$22.22M | +8.8% |
| Net Income | $784.15M$467.47M | +67.7% |
| EPS (Basic) | $4.72$2.74 | +72.3% |
| EPS (Diluted) | $4.28$2.60 | +64.6% |
| Shares Outstanding (Basic) | 166.12M170.43M | −2.5% |
| Shares Outstanding (Diluted) | 183.04M179.46M | +2.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of Teradyne's revenue growth in 2020?
Teradyne's revenue growth in 2020 was primarily driven by its Semiconductor Test segment, which saw a 45.5% increase due to strong demand for mobility and memory testers. The System Test segment also contributed positively with a 42.5% revenue increase.
How did the COVID-19 pandemic impact Teradyne's business segments?
The COVID-19 pandemic had a mixed impact. It negatively affected the Industrial Automation business, causing a revenue decline due to reduced demand amplified by shutdowns. However, the test businesses, particularly Semiconductor Test, showed resilience and strong demand, exceeding expectations.
What is Teradyne's strategy for growth and capital allocation?
Teradyne's strategy is to focus on profitably growing market share in its test businesses by introducing differentiated products and accelerating growth through continued investment in Industrial Automation. They plan to balance capital allocation between returning capital to shareholders (dividends and stock repurchases) and pursuing opportunistic acquisitions.
What is the company's exposure to key customers?
Teradyne's business is concentrated with a limited number of significant customers. In 2020, Taiwan Semiconductor Manufacturing Company Ltd. accounted for 15% of consolidated revenues, and the top five direct customers represented 36% of consolidated revenues. The company estimates that one OEM customer, including sales to its OSATs, accounted for approximately 25% of consolidated revenues.
06—Continue