10-QPeriod: Q3 FY2016

TERADYNE, INC Quarterly Report for Q3 Ended Oct 2, 2016

Filed November 10, 2016For Securities:TER

Summary

Teradyne, Inc. reported a net loss of $109.8 million for the first nine months of 2016, a significant downturn compared to a net income of $207.1 million in the same period of 2015. This loss was heavily influenced by substantial goodwill and intangible asset impairment charges totaling $338 million, primarily related to the Wireless Test segment, stemming from a sharp decline in projected demand. Despite this, the company's Semiconductor Test segment showed revenue growth for the nine-month period, and the Industrial Automation segment, bolstered by the acquisition of Universal Robots, also saw significant revenue increases. Total revenues for the nine months increased to $1.37 billion from $1.32 billion in the prior year, driven by growth in Semiconductor Test and the new Industrial Automation segment, though this was partially offset by declines in System Test and a significant drop in Wireless Test revenues. The company maintained a strong liquidity position with $1.25 billion in cash, cash equivalents, and marketable securities as of October 2, 2016. Teradyne also continued its share repurchase program and dividend payments, signaling confidence in its ongoing operational stability despite the reported net loss.

Key Highlights

  • 1Nine-month net loss of $109.8 million, a sharp decline from $207.1 million net income in the prior year period, largely due to $338 million in goodwill and intangible asset impairments in the Wireless Test segment.
  • 2Total revenues increased to $1.37 billion for the nine months ended October 2, 2016, up from $1.32 billion in the comparable 2015 period, driven by growth in Semiconductor Test and the Industrial Automation segment.
  • 3Semiconductor Test revenues increased by 10.1% for the nine months due to higher product volume in the application processor market.
  • 4Industrial Automation segment revenue increased significantly, boosted by the Universal Robots acquisition completed in June 2015.
  • 5Wireless Test segment revenues declined substantially ($81.6 million), impacting overall profitability, due to reduced demand from a major customer.
  • 6The company maintained strong liquidity, with cash, cash equivalents, and marketable securities totaling $1.25 billion as of October 2, 2016.
  • 7Teradyne continued its capital return strategy, repurchasing $85.1 million of stock and paying $36.5 million in dividends during the nine-month period.

Frequently Asked Questions

The primary reason for the net loss of $109.8 million in the first nine months of 2016 was the recording of significant goodwill and intangible asset impairment charges totaling $338 million. These impairments were primarily related to the Wireless Test segment, which experienced a sharp decline in projected demand.

The acquisition of Universal Robots, completed in June 2015, contributed to revenue growth in the Industrial Automation segment. For the nine months ended October 2, 2016, this segment added $65.4 million in revenue. The integration of Universal Robots also led to increased selling and administrative expenses.

The Wireless Test segment experienced a significant decline in revenue and substantial goodwill and intangible asset impairments due to a sharp decrease in projected demand from its largest customer. While demand is expected to improve in 2018, the company may need to implement further cost control measures. The significant customer concentration poses a risk of further revenue fluctuations.

Yes, Teradyne maintained a strong liquidity position. As of October 2, 2016, the company had $1.25 billion in cash, cash equivalents, and marketable securities. This, along with its continued share repurchase program and dividend payments, suggests financial stability despite the reported net loss, which was largely driven by non-cash impairment charges.