10-QPeriod: Q2 FY2020

TERADYNE, INC Quarterly Report for Q2 Ended Jun 28, 2020

Filed August 3, 2020For Securities:TER

Summary

Teradyne, Inc. (TER) reported robust revenue growth in the second quarter of 2020, primarily driven by a significant surge in its Semiconductor Test segment. This strong performance, coupled with disciplined expense management, led to a substantial increase in net income compared to the prior year period. The company's balance sheet remains strong, with solid liquidity and manageable debt levels. While the Semiconductor Test and Wireless Test segments showed impressive growth, the Industrial Automation segment experienced a notable decline, partly attributable to the ongoing COVID-19 pandemic's impact on manufacturing sectors. The company is actively monitoring global economic conditions and operational impacts of the pandemic, maintaining a cautious but optimistic outlook, and has secured a new revolving credit facility to further strengthen its liquidity position.

Financial Highlights

51 data points
Beta

Revenue

$838.66M

56.2% Gross Margin

Net Income

$188.91M

22.5% Net Margin

EPS (Diluted)

$1.05

Total Assets

$3.25B

Cash & Equivalents

$725.43M

Free Cash Flow

$175.58M

Financial Statements
Beta
Revenue$838.66M
Cost of Revenue$367.19M
Gross Profit$471.47M
SG&A Expenses$113.26M
Operating Expenses$253.52M
Operating Income$217.95M
Interest Expense$6.04M
Net Income$188.91M
EPS (Basic)$1.14
EPS (Diluted)$1.05
Shares Outstanding (Basic)165.79M
Shares Outstanding (Diluted)180.26M

Key Highlights

  • 1Total revenues increased by 48.6% to $838.7 million for the three months ended June 28, 2020, compared to $564.2 million for the three months ended June 30, 2019.
  • 2Net income for the three months ended June 28, 2020, rose to $188.9 million ($1.05 per diluted share), a significant increase from $97.4 million ($0.55 per diluted share) in the prior year period.
  • 3The Semiconductor Test segment was the primary driver of revenue growth, increasing by 75.8% to $659.1 million, attributed to strong demand for mobility and memory testers.
  • 4The Industrial Automation segment experienced a revenue decline of 21.3% to $58.8 million, impacted by reduced demand exacerbated by the COVID-19 pandemic.
  • 5The company ended the quarter with a strong liquidity position, with $725.4 million in cash and cash equivalents and $336.8 million in marketable securities.
  • 6Teradyne entered into a new $400 million, three-year revolving credit facility in May 2020, further enhancing its financial flexibility.
  • 7The company's effective tax rate decreased significantly to 13.1% in Q2 2020 from 25.8% in Q2 2019, primarily due to a reduction in discrete expense related to the U.S. transition tax.

Frequently Asked Questions

The substantial revenue increase was primarily driven by the Semiconductor Test segment, which saw a 75.8% rise due to strong demand for mobility testers (driven by increasing silicon complexity in handsets) and memory testers (for flash and DRAM). The Wireless Test segment also contributed positively with increased demand for 5G and WiFi 6 testers.

The COVID-19 pandemic has had a mixed impact. While demand for Semiconductor and Wireless Test products remained strong, the Industrial Automation business experienced a significant decline due to pandemic-related shutdowns affecting global manufacturing. The company also incurred increased operational costs and has implemented enhanced safety protocols and remote work arrangements.

Teradyne maintains a strong financial position with $725.4 million in cash and cash equivalents and $336.8 million in marketable securities as of June 28, 2020. The company also secured a new $400 million revolving credit facility, providing additional financial flexibility. Management believes current resources are sufficient to meet working capital needs for the next twelve months.

Gross profit as a percentage of revenue slightly decreased due to product mix in Semiconductor Test and higher logistics/operations costs related to COVID-19. Selling and administrative expenses increased slightly due to higher variable compensation, while engineering and development expenses rose due to increased variable compensation and higher spending in Semiconductor Test. The effective tax rate significantly decreased due to a reduction in discrete expense related to the U.S. transition tax.