10-QPeriod: Q2 FY2007

TERADYNE, INC Quarterly Report for Q2 Ended Apr 1, 2007

Filed May 11, 2007For Securities:TER

Summary

Teradyne, Inc. reported a net loss of $7.6 million for the first quarter of 2007, a significant decline from a net income of $44.9 million in the same period of the prior year. This downturn was primarily driven by a 29% decrease in net revenues, largely attributable to a 34% drop in Semiconductor Test Systems sales due to reduced demand across various end markets. While the company continues to invest in engineering and development and made a strategic acquisition of in-process technology, operating expenses increased as a percentage of revenue, impacting profitability. The company's financial position remains solid with $405.6 million in cash and cash equivalents and $478.2 million in marketable securities as of April 1, 2007. However, operating activities consumed $30.4 million in cash during the quarter, necessitating the use of cash reserves. Management anticipates that existing liquidity will be sufficient for foreseeable needs, but the significant revenue decline and shift to a net loss position highlight current market headwinds and the cyclical nature of the semiconductor test equipment industry.

Key Highlights

  • 1Reported a net loss of $7.6 million for Q1 2007, compared to a net income of $44.9 million in Q1 2006.
  • 2Net revenues decreased by 29% to $258.1 million in Q1 2007, primarily due to a 34% decline in Semiconductor Test Systems revenue.
  • 3Bookings decreased by 31% overall, with Semiconductor Test Systems bookings down 34%, reflecting reduced market demand.
  • 4Gross profit margin declined to 44.8% from 47.0% year-over-year, impacted by lower sales volumes and an inventory provision in the prior year.
  • 5Operating expenses as a percentage of revenue increased from 34% in Q1 2006 to 52% in Q1 2007, largely due to a $16.7 million charge for in-process research and development.
  • 6Cash and cash equivalents decreased by $162.4 million to $405.6 million, with operating activities consuming $30.4 million.
  • 7The company repurchased $3.6 million of its common stock in Q1 2007.

Frequently Asked Questions

The primary reason is a significant decrease in demand for Semiconductor Test Systems, which led to a 34% drop in revenue for this segment and a 29% overall decline in net revenues. This is attributed to the highly cyclical nature of the semiconductor test equipment market and reduced demand across various end markets.

Teradyne's cash and cash equivalents decreased by $162.4 million to $405.6 million during the first quarter of 2007. Operating activities used $30.4 million in cash. The company believes its current balance of cash, cash equivalents, and marketable securities is sufficient to meet working capital and expenditure needs for at least the foreseeable future.

Teradyne acquired in-process enabling test technology and engineers for $17.6 million. Of this amount, $16.7 million was allocated to in-process research and development and immediately expensed, contributing to the company reporting a net loss for the quarter. This acquisition is intended to support the development of a new semiconductor test product.

The filing indicates significant headwinds in the Semiconductor Test Systems segment due to market cyclicality and reduced demand. While the company is investing in future technologies, the current performance suggests a challenging near-term outlook for revenue and profitability until market conditions improve.